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What changed in MERCADOLIBRE INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MERCADOLIBRE INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+536 added−508 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-24)

Top changes in MERCADOLIBRE INC's 2023 10-K

536 paragraphs added · 508 removed · 399 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

97 edited+45 added−26 removed99 unchanged
Biggest changeOur employees in Brazil are represented by different labor unions: i) Fetramag ( “Federação dos Trabalhadores na Movimentação de Mercadorias em Geral de Goiás, Bahia e Piauí” ) in the States of Goias, Bahia and Piauí, ii) Fetrammergs ( “Federação dos Trabalhadores na Movimentação de Mercadorias em Geral, Comércio Armazenador e Auxiliares de Administração de Armazéns Gerais do Estado do Rio Grande do Sul” ) in the State of Rio Grande do Sul, iii) Sindiesp ( “Sindicato dos Trabalhadores nas Empresas de Internet Manutenção e Cursos de Informática do Estado de São Paulo” ) in the State of São Paulo, iv) Fetramov ( “Federação dos Trabalhadores na Movimentação de Mercadorias em Geral e Operações de Logística do Estado de Minas Gerais” ) in the State of Minas Gerais, v) Sintracamp ( “Sindicato da Categoria Profissional dos Trabalhadores Empregados e Avulsos, na Movimentação e Ensacamento de Mercadorias e de Cargas e Descargas em Geral de Campinas e Região” ) in the city of Louveira, State of São Paulo, vi) Sintrammgep ( “Sindicato dos Trabalhadores em Movimentação de Mercadorias em Geral de Paulínia e Região” ) in the city of Cajamar, State of São Paulo, vii) Fetrammasc ( “Federação dos Trabalhadores na Movimentação de Mercadorias em Geral e Auxiliar de Administração em Gerais, Similares, Conexos” ) in the State of Santa Catarina, viii) Sintramoju ( “Sindicato dos Trabalhadores na Movimentação de Mercadorias em Geral e Logistica de Jundiaí e Região” ) in the city of Franco da Rocha, State of São Paulo, ix) Sintrammsp ( “Sindicato dos Trabalhadores, na Movimentação de Mercadorias em Geral e Auxiliar na Administração em Geral de São Paulo” ) in the City of Perus, State of São Paulo, and x) Sindlog ( “Sindicato dos Empregados em Escritórios de Empresas de Transportes Rodoviários de Cargas Secas e Molhadas, Cargas Pesadas e Logísticas em Transportes de São Paulo e Itapecerica de Serra” ), in the cities of São Paulo e Itapecerica da Serra, State of São Paulo.
Biggest changeOur employees in Brazil are represented by different labor unions: i) Fetramag (“Federação dos Trabalhadores na Movimentação de Mercadorias em Geral de Goiás, Bahia e Piauí”) in the States of Goias, Bahia and Piauí, ii) Fetrammergs (“Federação dos Trabalhadores na Movimentação de Mercadorias em Geral, Comércio Armazenador e Auxiliares de Administração de Armazéns Gerais do Estado do Rio Grande do Sul”) in the State of Rio Grande do Sul, iii) Sindiesp (“Sindicato dos Trabalhadores nas Empresas e Cursos de Informática do Estado de São Paulo”) in the State of São Paulo, iv) Fetramov (“Federação dos Trabalhadores na Movimentação de Mercadorias em Geral e Operações de Logística do Estado de Minas Gerais”) in the State of Minas Gerais, v) Sintracamp (“Sindicato da Categoria Profissional dos Trabalhadores Empregados e Avulsos, na Movimentação e Ensacamento de Mercadorias e de Cargas e Descargas em Geral de Campinas e Região”) in the city of Louveira, State of São Paulo, vi) Sintrammgep (“Sindicato dos Trabalhadores em Movimentação de Mercadorias em Geral de Paulínia e Região”) in the city of Cajamar, State of São Paulo, vii) Fetrammasc (“Federação dos Trabalhadores na Movimentação de Mercadorias em Geral e Auxiliar de Administração em Gerais, Similares, Conexos”) in the State of Santa Catarina, viii) Sintramoju (“Sindicato dos Trabalhadores na Movimentação de Mercadorias em Geral e Logistica de Jundiaí e Região”) in the city of Franco da Rocha, State of São Paulo, ix) Sintrammsp (“Sindicato dos Trabalhadores, na Movimentação de Mercadorias em Geral e Auxiliar na Administração em Geral de São Paulo”) in the city of Perus, State of São Paulo, x) Sindpd SC (“Sindicato dos Empregados em Empresas de Processamento de Dados de Santa Catarina”) in the State of Santa Catarina, and xi) Sinetrosv (“Sindicato dos Empregados em Escritório de Empresas de Transporte Rodoviário de Osasco, Sorocaba e Vale do Ribeira”) in the cities of Osasco, Sorocaba and Vale do Ribeira, State of São Paulo.
Although much of our seasonality is due to the year-end promotional campaigns and the Christmas holiday season, the geographic diversity of our operations helps mitigate the seasonality attributed to summer vacation time (i.e. southern and northern hemispheres) and national holidays.
Although much of our seasonality is due to the year-end promotional campaigns and the Christmas holiday season, the geographic diversity of our operations (i.e. southern and northern hemispheres) helps mitigate the seasonality attributed to summer vacation time and national holidays.
The following table shows the main services currently available in each country where we operate: Country Marketplace Mercado Pago Mercado Envios Mercado Credito Argentina ü ü ü ü Brazil ü ü ü ü Mexico ü ü ü ü Uruguay ü ü ü Colombia ü ü ü Chile ü ü ü ü Peru ü ü ü Ecuador ü ü ü Venezuela, Costa Rica, Dominican Republic, Panama, Bolivia, Guatemala, Paraguay, Nicaragua, Honduras, El Salvador ü We have two distinctive revenue streams in our business: • Commerce Revenue Our Commerce business is comprised of two primary revenue streams: Services and Product Sales.
Table of Contents The following table shows the main services currently available in each country where we operate: Country Marketplace Mercado Pago Mercado Envios Mercado Credito Argentina ü ü ü ü Brazil ü ü ü ü Mexico ü ü ü ü Uruguay ü ü ü Colombia ü ü ü Chile ü ü ü ü Peru ü ü ü Ecuador ü ü ü Venezuela, Costa Rica, Dominican Republic, Panama, Bolivia, Guatemala, Paraguay, Nicaragua, Honduras, El Salvador ü We have two distinctive revenue streams in our business: ■ Commerce revenue Our Commerce business is comprised of two primary revenue streams: Services and Product Sales.
With a seamless onboarding, this product allows users to withdraw and use the value stored in their digital wallets at any given time through QR code in-store payments, pre-paid cards, or cash withdrawn from an ATM, without requiring that their funds be trapped in a money market fund or a certificate of deposit to obtain an equivalent return.
With a seamless onboarding, this product allows users to withdraw and use the value stored in their digital wallets at any given time through QR code in-store payments, pre-paid and debit cards, or cash withdrawn from an ATM, without requiring that their funds be trapped in a money market fund or a certificate of deposit to obtain an equivalent return.
This service allows our millions of users to purchase, hold and sell selected digital assets through our interface without leaving the Mercado Pago application, while a partner acts as the custodian and exchange and offers the blockchain infrastructure platform. This feature is available for all users through their Mercado Pago wallet.
This service allows our millions of users to purchase, hold and sell selected digital assets through our interface without leaving the Mercado Pago application, while a partner acts as the custodian and offers the blockchain infrastructure platform. This feature is available for all users through their Mercado Pago wallet.
Intellectual Property Rights Our intellectual property rights (“IPRs”) are critical to our future success and rely on a combination of copyright, trademark, patent designs, trade secret laws and contractual restrictions. We pursue the registration of our intangible assets in each country where we operate.
Intellectual Property Rights Our intellectual property rights are critical to our future success and rely on a combination of copyright, trademark, patent designs, trade secret laws and contractual restrictions. We pursue the registration of our intangible assets in each country where we operate.
These recent regulations aim to promote transparency in credit transactions, a broader credit offer and to allow merchants to offer their credit card receivables as collateral to receive better loan offers, improving competition and reducing the cost of credit.
These recent regulations aim to promote transparency in credit transactions, a broader credit offer and to allow merchants to offer their credit card receivables as collateral to receive better loan offers, improving competition and reducing the cost of credit. 3.
These rules require us to implement policies and internal procedures to manage, monitor, identify and, if applicable, report suspicious transactions to the relevant authorities to prevent the practice of crimes of “money laundering” or concealment of assets.
These rules require us to implement policies and internal procedures to manage, monitor, identify and, if applicable, report suspicious transactions to the relevant authorities to prevent the practice of crimes of “money laundering” or concealment of assets. 2.
We have entered into confidentiality and intellectual property (“IP”) assignment agreements with our employees and certain contractors. To prevent disclosure of our proprietary information to unauthorized parties, we have also entered into non-disclosure agreements with our employees, strategic partners and suppliers.
We have entered into confidentiality and intellectual property assignment agreements with our employees and certain contractors. To prevent disclosure of our proprietary information to unauthorized parties, we have also entered into non-disclosure agreements with our employees, strategic partners and suppliers.
(ii) Register of Receivables from Payment: Mercado Pago is also subject to rules regarding the register of credit card receivables and credit operations in a centralized system operated by an entity authorized by the BACEN.
Register of Receivables from Payment: Mercado Pago is also subject to rules regarding the register of credit card receivables and credit operations in a centralized system operated by an entity authorized by the BACEN.
(iv) Data Protection Law: In August 2018, Brazil approved its first comprehensive data protection law (the “Lei Geral de Proteção de Dados Pessoais” or “LGPD”), which became applicable to our business in Brazil in August 2020.
Data Protection Law: In August 2018, Brazil approved its first comprehensive data protection law (the “Lei Geral de Proteção de Dados Pessoais” or “LGPD”), which became applicable to our business in Brazil in August 2020.
To include all perspectives and accelerate the change in mindset of the organization, in 2022 we set out to advance diversity especially in the following four pillars: ethnicity, gender, sexual orientation and expression, and disability.
To include all perspectives and accelerate the change in mindset of the organization, we set out to advance diversity especially in the following four pillars: ethnicity, gender, sexual orientation and expression, and disability.
According to the BACEN’s regulation, Mercado Pago is required to maintain funds in an amount equal to the value of the balance of funds held in a payment account and in transit between payment accounts at the same payment institution in: (i) a specific account in the BACEN (Correspondent Account for Electronic Currency - CCME) or (ii) federal government bonds, registered at the Special Settlement and Custody System ("SELIC").
According to the BACEN’s regulation, Mercado Pago is required to maintain funds in an amount equal to the value of the balance of funds held in a payment account and in transit between payment accounts at the same payment institution in: (i) a specific account in the BACEN (Correspondent Account for Electronic Currency - CCME) or (ii) federal government bonds, registered at the Special Settlement and Custody System (“SELIC”).
The regulation sets forth certain specific rules related to (i) providing information to users; (ii) depositing users’ funds in a freely available bank account; (iii) allowing users to dispose immediately of the funds credited to their accounts; and (iv) providing information to the CBA relating to the business of payments processing.
The regulation sets forth certain specific rules related to (i) providing information to users; (ii) depositing users’ funds in a freely available bank account; (iii) allowing users to dispose immediately of the funds credited to their accounts; and (iv) providing information to the CBA relating to the business of payment processing.
Chile In 2017 and 2018, Chile enacted regulations regarding the issuance and operation of payment cards, which could affect Mercado Pago's operations, including authorization to operate, anti-money laundering obligations, capital requirements and reserve funds, operational and security safeguards, among others.
Table of Contents Chile In 2017 and 2018, Chile enacted regulations regarding the issuance and operation of payment cards, which could affect Mercado Pago’s operations, including authorization to operate, anti-money laundering obligations, capital requirements and reserve funds, operational and security safeguards, among others.
The BACEN implemented the Brazilian Open Banking environment, to enable the sharing of data, products and services between regulated entities — financial institutions, payment institutions and other entities licensed by the BACEN — at the customers' discretion, as far as their own data is concerned (individuals or legal entities).
The BACEN implemented the Brazilian Open Finance environment, to enable the sharing of data, products and services between regulated entities — financial institutions, payment institutions and other entities licensed by the BACEN — at the customers’ discretion, as far as their own data is concerned (individuals or legal entities).
Risk factors— Intellectual Property Risks — We could face legal and financial liability upon the sale of items that infringe intellectual property rights of third parties and for information and material disseminated through our platforms ”, which describes these risks as well as our Brand Protection Program, which we make available to IPR holders to enable them to enforce their rights against listings on our sites that allegedly infringe upon their rights.
Risk factors—Intellectual Property Risks—We could face legal and financial liability upon the sale of items that infringe intellectual property rights of third parties and for information and material disseminated through our platforms”, which describes these risks as well as our Brand Protection Program, which we make available to IPR holders to enable them to enforce their rights against listings on our sites that allegedly infringe upon their rights.
(iii) Cybersecurity Policies: In 2018 the BACEN published new rules setting forth cybersecurity policies and requirements for the contracting relevant data processing and storage services as well as cloud-based computing services, which are applicable both to Mercado Pago and Mercado Credito.
Cybersecurity Policies: In 2018 the BACEN published new rules setting forth cybersecurity policies and requirements for the contracting relevant data processing and storage services as well as cloud-based computing services, which are applicable both to Mercado Pago and Mercado Credito. 4.
MercadoLibre’s DNA, our culture, is best represented by a protagonist attitude, a relentless mandate to create value for our clients, to take risks and innovate, while delivering excellence as a team. Integrity nurtures our DNA and defines our identity, beliefs and conduct.
MercadoLibre’s DNA, our culture, is best represented by a protagonist attitude, a relentless mandate to create value for our users to take risks and innovate, while delivering excellence as a team. Integrity nurtures our DNA and defines our identity, beliefs and conduct.
Talent, Culture and Development If we want to shed light on the most significant attribute that makes MercadoLibre a unique place to work at, we need to point to our entrepreneurial culture. This attribute, visible since our early garage days in Buenos Aires, continues to live in the more than 40,000 people that create our great team across Latin America.
Culture and Development If we want to shed light on the most significant attribute that makes MercadoLibre a unique place to work at, we need to point to our entrepreneurial culture. This attribute, visible since our early garage days in Buenos Aires, continues to live in the more than 58,000 people that create our great team across Latin America.
In addition, Law No. 12,865/2013 gave the Brazilian Central Bank (“BACEN”), according to guidelines set out by the National Monetary Council (“CMN”) authority to regulate entities involved in the payments industry. 13 Table of Contents Pursuant to that authority, the CMN and the BACEN created a regulatory framework regulating the operation of payment schemes and payment institutions.
In addition, Law No. 12,865/2013 gave the Brazilian Central Bank (“BACEN”), according to guidelines set out by the National Monetary Council (“CMN”) authority to regulate entities involved in the payments industry. 12 | MercadoLibre, Inc. Table of Contents Pursuant to that authority, the CMN and the BACEN created a regulatory framework regulating the operation of payment schemes and payment institutions.
In addition, our developers frequently interact with technology suppliers and attend technology-related events to familiarize themselves with the latest innovations and developments in the field. We also rely on certain technologies that we license from third parties, suppliers of key database technology, operating systems and specific hardware components for our services.
In addition, our developers frequently interact with technology suppliers and attend technology-related events to familiarize themselves with the latest innovations and developments in the field. We also rely on certain technologies that we license from third parties, suppliers of key database technology, operating systems and specific hardware components for our services. 8 | MercadoLibre, Inc.
We use our investor relations website as a means of disclosing material, non-public information and for complying with our disclosure obligations under SEC Regulation FD (Fair Disclosure). Accordingly, investors should monitor our Investor Relations website, in addition to following our press releases, SEC filings, public conference calls and webcasts.
Our investor relations website is investor.mercadolibre.com. We use our investor relations website as a means of disclosing material, non-public information and for complying with our disclosure obligations under SEC Regulation FD (Fair Disclosure). Accordingly, investors should monitor our investor relations website, in addition to following our press releases, SEC filings, public conference calls and webcasts.
On January 27, 2023, MercadoPago Perú S.R.L. was registered by the BCRP as a payment facilitator entity, allowed to (a) affiliate merchants to the card payment system, (b) offer POS, and (c) transmit or process card payment orders and /or participate in the process of settlement to the merchants affiliated.
On January 27, 2023, MercadoPago Perú S.R.L. was registered by the BCRP as a payment facilitator entity, allowing it to (a) affiliate merchants to the card payment system, (b) offer POS, and (c) transmit or process card payment orders and /or participate in the process of settlement to the merchants affiliated.
In August 2021, the Under Secretariat of Knowledge Economy issued the Disposition 316/2021 approving MercadoLibre S.R.L.’s application for eligibility under the knowledge-based economy promotional regime. Tax benefits granted pursuant to the promotional regime to MercadoLibre S.R.L. were retroactive to January 1, 2020. See Item 8 of Part II, “Financial Statements and Supplementary Data-Note 14-Income taxes” for further information.
In August 2021, the Under Secretariat of Knowledge Economy issued the Disposition 316/2021 approving MercadoLibre S.R.L.’s application for eligibility under the knowledge-based economy promotional regime. Tax benefits granted pursuant to the promotional regime to MercadoLibre S.R.L. were retroactive to January 1, 2020. See Item 8 of Part II, Financial Statements and Supplementary Data—Note 14 – Income taxes for further information.
There are two types of payment arrangements, as defined by Resolution 150/21: (a) “Closed Loop Payment Arrangement”: payment arrangements whereby the payment services (account management, issuance and accreditation of payment instrument) are performed by only one legal entity, which also acts as the payment arranger (or is controlled/the controller of the payment arranger) and (b) “Open Loop Payment Arrangement”: any payment arrangements that do not fit into the concept of “Closed Loop Payment Arrangement”.
There are two types of payment arrangements, as defined by Resolution 150/21: (i) “Closed Loop Payment Arrangement”: payment arrangements whereby the payment services (account management, issuance and accreditation of payment instrument) are performed by only one legal entity, which also acts as the payment arranger (or is controlled/the controller of the payment arranger) and (ii) “Open Loop Payment Arrangement”: any payment arrangements that do not fit into the concept of “Closed Loop Payment Arrangement”.
The Open Banking implementation has been gradual, through incremental phases that take into account specific information/services to be shared, and Mercado Pago has been a participant of the Open Banking system since February 2021, when its phase 1 started.
The Brazilian Open Finance implementation has been gradual, through incremental phases that take into account specific information/services to be shared, and Mercado Pago has been a participant of the Brazilian Open Finance system since February 2021, when its phase 1 started.
For this reason, we strive to honor every day the value proposition that we offer to our employees. Well-being At MercadoLibre we seek to maximize human potential by sharing the "MELI stage" of each person's life as an integrated and full course of events that can be fully taken advantage of.
For this reason, we strive to honor every day the value proposition that we offer to our employees. Well-being At MercadoLibre we seek to maximize human potential by sharing the “MELI stage” of each person’s life as an integrated and full course of events that can be fully taken advantage of.
To this end, we employ various means of advertising, including placement in leading online channels across Latin America, paid and organic positioning in leading search engines, email and push notification marketing, onsite marketing, presence in offline media and live-streaming events, and use of targeted promotional discount coupons.
To this end, we employ various means of advertising, including placement in leading online channels across Latin America, paid and organic positioning in leading search engines, email and push notification marketing, onsite marketing, presence in offline media, sponsorship of large events, and use of targeted promotional discount coupons.
As an extension of our asset management and savings solutions for users, we launched a digital assets feature as part of the Mercado Pago wallet in Brazil in 2021 and in Mexico in 2022.
As an extension of our asset management and savings solutions for users, we launched a digital assets feature as part of the Mercado Pago wallet in Brazil, Mexico and Chile, in 2021, 2022 and 2023, respectively.
Our Services revenue stream is mainly generated from Marketplace fees that include final value fees and flat fees for transactions below a certain merchandise value, related shipping fees net of third-party carrier costs (when we act as an agent), classifieds fees, ad sales up-front fees, and fees from other ancillary businesses.
Our Services revenue stream is mainly generated from Marketplace fees that include final value fees and flat fees for transactions below a certain merchandise value, related shipping fees net of third-party carrier costs (when we act as an agent) and storage fees, classifieds fees, advertising sales fees, and fees from other ancillary businesses.
In partnership with a third party, we also launched three investment fund options in Brazil, which enable our users to diversify their investment portfolio in an accessible way and with options for quick withdrawal. Our advertising platform, Mercado Ads, enables businesses to promote their products and services on the internet.
In partnership with a third party, we also launched three investment fund options in Brazil, which enable our users to diversify their investment portfolio in an accessible way and with options for quick withdrawal. Our advertising platform, Mercado Ads, enables businesses to promote their products and services on the Mercado Libre Marketplace and Mercado Pago Fintech platform.
Government regulation We are subject to a variety of laws, decrees and regulations that affect companies conducting business on the Internet in some of the countries where we operate related to e-commerce, fintech, privacy, data protection, taxation (including value added taxes (“VAT”), or sales tax), obligations to provide information to certain authorities about transactions occurring on our platform or about our users, anti-money laundering regulations, transport regulations and other legislation which also applies to other companies conducting business in general.
Government Regulation We are subject to a variety of laws, decrees and regulations that affect companies conducting business on the Internet in some of the countries where we operate related to e-commerce, fintech, privacy, data protection, taxation, obligations to provide information to certain authorities about transactions occurring on our platform or about our users, anti-money laundering regulations, transport regulations and other legislation which also applies to other companies conducting business in general.
During March 2022, the Central Bank of Brazil announced new prudential rules for payment institutions based on their size and complexity and raising standards for required capital.
During March 2022, the Central Bank of Brazil announced new rules for payment institutions based on their size and complexity and raised standards for required capital.
Information on or connected to our website is neither part of nor incorporated into this report on Form 10-K or any other SEC filings we make from time to time. 18 Table of Contents
Information on or connected to our website is neither part of nor incorporated into this report on Form 10-K or any other SEC filings we make from time to time. 17 | MercadoLibre, Inc. Table of Contents
In November 2021, the Chilean Commission for the Financial Market (“CMF”) granted Mercado Pago, through its entities Mercado Pago Emisora S.A. and MercadoPago S.A., a prepaid card issuer license and payment card operator license, respectively.
In November 2021, the Chilean Commission for the Financial Market (“CMF”) granted Mercado Pago, through its entities Mercado Pago Emisora S.A. and Mercado Pago Operadora S.A. (formerly know as MercadoPago S.A.), a prepaid card issuer license and payment card operator license, respectively.
We believe that a significant portion of our growth will be derived from these new or expanded product and service launches within our ecosystem in the future. • Continue to improve the shopping experience for our users .
We believe that a significant portion of our growth will be derived from these new or expanded product and service launches within our ecosystem in the future. 7 | MercadoLibre, Inc. Table of Contents ■ Continue to improve the shopping experience for our users .
Law 25.326 in Argentina, Federal Law on the Protection of Personal Data on Private Sector Possession in Mexico, Laws No. 1581/2012 and 1266/2008 in Colombia, Law No. 19,628, Law No. 18.331 in Uruguay and Law No. 29.733 in Peru).
Law 13,709 (LGPD) in Brazil, Law 25,326 in Argentina, Federal Law on the Protection of Personal Data on Private Sector Possession in Mexico, Laws No. 1581/2012 and 1266/2008 in Colombia, Law No. 19,628 in Chile, Law No. 18,331 in Uruguay and Law No. 29,733 in Peru).
In September 2016, we obtained the registration of our Uruguayan subsidiary Deremate.com de Uruguay S.R.L. from the Central Bank of Uruguay as an entity entitled to provide services of payments and collections (“PSPC”). Thus, on November 1, 2016, Mercado Pago was launched in Uruguay.
Uruguay Uruguay has implemented comprehensive regulations governing electronic payments. In September 2016, we obtained the registration of our Uruguayan subsidiary Deremate.com de Uruguay S.R.L. from the Central Bank of Uruguay (“BCU”) as an entity entitled to provide services of payments and collections (“PSPC”). Thus, on November 1, 2016, Mercado Pago was launched in Uruguay.
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. Our Annual Impact report, the Sustainability Bond report and the Task Force on Climate-Related Disclosures are available on our investor relations website.
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. Our Annual Integrated Impact report and the Sustainability Bond report are available on our investor relations website.
On December 30, 2021, the board of the CBA issued a regulation that established that financial institutions must set up a reserve of 100% of the funds deposited by payment service providers that offer payment accounts in which the customers’ funds are deposited.
On December 30, 2021, the board of the CBA issued a regulation by which financial institutions must set up a reserve of 100% of the customer funds deposited by payment service providers that offer payment accounts.
We want everyone to be heard and to be able to express themselves, give their opinion, and propose ideas to innovate and challenge their team with new perspectives. ○ The promotion of an inclusive society, fostering equal opportunities for all with products, services, and initiatives. We prioritize the inclusion and development of women in our sector.
We want everyone to be heard and to be able to express themselves, give their opinion, and propose ideas to innovate and challenge their team with new perspectives. ■ The promotion of an inclusive society, fostering equal opportunities for all with products, services, and initiatives. 11 | MercadoLibre, Inc.
In our main markets, we currently offer the following solutions: • In-store physical payments by selling mobile point of sale (“MPOS”) devices and through quick response (“QR”) payment codes; 5 Table of Contents • Digital payment solutions for utilities, mobile phone top up, peer-to-peer payments and more through our mobile wallet; • Pre-paid cards and debit cards for users to spend and withdraw their account balances from their Mercado Pago wallet; • Merchant and consumer credits, both on and off the Mercado Libre Marketplace, and credit cards; • Insurance products such as extended warranties, theft and damage policies, among others; • Savings and investment products to invest balances stored on Mercado Pago accounts; and • A cryptocurrency buy, hold and sell feature of our wallet in Brazil and Mexico, for users to buy, hold and sell selected global cryptocurrencies and stablecoins.
In our main markets, we currently offer the following solutions: ■ In-store physical payments by selling mobile point of sale (“MPOS”) devices and through quick response (“QR”) payment codes; ■ Digital payment solutions for utilities, mobile phone top up, peer-to-peer payments and more through our digital account; ■ Pre-paid cards and debit cards for users to spend and withdraw their account balances from their Mercado Pago digital account; ■ Merchant and consumer credits, both on and off the Mercado Libre Marketplace, and credit cards; ■ Insurance products such as extended warranties, theft and damage policies, among others; 5 | MercadoLibre, Inc.
In the past, we started a deep technology overhaul to switch from a closed and monolithic system to an open and decoupled one. We split our teams into many decoupled and autonomous “cells”. A cell is a functional unit with its own team, hardware, data and source code. Cells interact with each other using Application Programming Interfaces, or APIs.
Table of Contents In the past, we started a deep technology overhaul to switch from a closed and monolithic system to an open and decoupled one. We split our teams into many decoupled and autonomous “cells”. A cell is a functional unit with its own team, hardware, data and source code.
On September 1, 2022, the CBA issued a regulation that extended the application of the rules for the protection of users of financial services to payment service providers (the regulation was already applicable to non-financial loan providers). This regulation will enter into force on March 1, 2023.
Table of Contents On September 1, 2022, the CBA issued a regulation that extended the application of the rules for the protection of users of financial services to PSPOCP. The regulation was already applicable to non-financial loan providers. This regulation came into effect on March 1, 2023.
We have created a program to implement the relevant requirements to our business processes, compliance infrastructures and IT systems to comply with data protection laws. Further, some jurisdictions in which we operate are considering imposing additional restrictions or regulations. 17 Table of Contents Offices We are a Delaware corporation incorporated on October 15, 1999.
We have created a program to implement the relevant requirements to our business processes, compliance infrastructures and IT systems to comply with data protection laws. Further, some jurisdictions in which we operate are considering imposing additional restrictions or regulations.
Pursuant to the BACEN’s regulations, we are required to report certain operational information regarding this scheme to the BACEN on an annual basis, such as the number of users and the annual cash value of our peer-to-peer transfer transactions.
Pursuant to the BACEN’s regulations, we are required to report certain operational information regarding this scheme to the BACEN on an annual basis, such as the number of users and the annual cash value of our peer-to-peer transfer transactions. In addition, Mercado Pago as a payment institution in Brazil is subject to: 1.
This successful overhaul allowed us to unlock greater developer productivity from all our teams. In the past, we opened up our platform to allow third parties to integrate the various features of our platform into custom applications.
Cells interact with each other using Application Programming Interfaces, or APIs. This successful overhaul allowed us to unlock greater developer productivity from all our teams. In the past, we opened up our platform to allow third parties to integrate the various features of our platform into custom applications.
Recruitment and Hiring Our recruitment and hiring strategy is an example of our commitment to serve as a growth engine for Latin America in response to the challenges presented in the last years. In 2022, we continued to generate quality employment.
Talent, Recruitment and Hiring Our recruitment and hiring strategy is an example of our commitment to serve as a growth engine for Latin America in response to the challenges presented in the last years. It is a privilege and source of pride to continue generating quality employment in Latin America.
In addition, Mercado Pago as a payment institution in Brazil is subject to: (i) Anti-Money Laundering Rules: Mercado Pago is subject to Brazilian laws and regulations relating to anti-money laundering, terrorism financing and other potentially illegal activities.
Anti-Money Laundering Rules: Mercado Pago is subject to Brazilian laws and regulations relating to anti-money laundering, terrorism financing and other potentially illegal activities.
Unions or local regulations in other countries could also require that employees be represented. We consider our relations with our employees to be good and we implement a variety of human resources practices, programs and policies that are designed to hire, develop, compensate and retain our employees.
We consider our relations with our employees to be good and we implement a variety of human resources practices, programs and policies that are designed to hire, develop, compensate and retain our employees.
The new framework, which will be effective starting in July 2023 with full implementation by January 2025, will extend the application of the rule regarding proportionality of regulatory requirements (currently applicable to conglomerates of financial institutions) to financial conglomerates led by payment institutions. We are assessing the effects that the new rules may have on its regulated Brazilian subsidiaries.
The new framework, which was effective starting in July 2023 with full implementation by January 2025, will extend the application of the rule regarding proportionality of regulatory requirements (currently applicable to conglomerates of financial institutions) to financial conglomerates led by payment institutions.
Internet activities in Brazil are regulated by Law No. 12,965/2014, known as the Brazilian Civil Rights Framework for the internet, which embodies a substantial set of rights of internet users and obligations relating to internet service providers, including data protection. Law No. 12,865/2013 prohibits payment institutions from performing activities that are restricted to financial institutions, such as granting loans directly.
Internet activities in Brazil are regulated by Law No. 12,965/2014, known as the Brazilian Civil Rights Framework for the internet, which embodies a substantial set of rights of internet users and obligations relating to internet service providers, including data protection. 13 | MercadoLibre, Inc.
Our strategy Our main focus is to serve people in Latin America by enabling wider access to retail, digital payments and e-commerce services, and by providing compelling technology-based solutions that democratize commerce and money, thus contributing to the development of a large and growing digital economy in a region with a population of over 650 million people and one of the fastest-growing e-commerce and internet penetration rates in the world. 7 Table of Contents We serve our buyers by giving them access to a broad and affordable variety of products and services, a selection we believe to be larger than otherwise available to them via other online and offline sources serving our Latin American markets.
Our strategy Our main focus is to serve people in Latin America by enabling wider access to retail, digital payments and e-commerce services, and by providing compelling technology-based solutions that democratize commerce and money, thus contributing to the development of a large and growing digital economy in a region with a population of over 650 million people and one of the fastest-growing e-commerce and internet penetration rates in the world.
Lastly, commercial campaigns like Hot Sale, Black Friday and Cyber Monday generate an increase in transactions. 9 Table of Contents Competition The online commerce market is rapidly evolving and is highly competitive. Barriers-to-entry for large, well-established internet companies are relatively low, and current and new competitors can launch new sites at a relatively low cost using commercially available software.
Competition The online commerce market is rapidly evolving and is highly competitive. Barriers-to-entry for large, well-established internet companies are relatively low, and current and new competitors can launch new sites at a relatively low cost using commercially available software.
In 2021, we launched our first Mercado Pago credit card in Brazil, which is free, internationally accepted, digitally managed and can be used on- and off-platform. An advantage of the credit card is that it allows users to pay in additional installments for purchases on the Mercado Libre Marketplace and accrue additional points to our user loyalty program.
An advantage of the Mercado Pago credit card is that it allows users to pay in additional installments for purchases on the Mercado Libre Marketplace and accrue additional points to our user loyalty program.
At MercadoLibre, we do so by offering people a meaningful experience and co-creating the best place to work, one where our DNA multiplies.
Table of Contents Leading the business in every market where we operate requires attracting, engaging and developing the best talent. At MercadoLibre, we do so by offering people a meaningful experience and co-creating the best place to work, one where our DNA multiplies.
Typically, the fourth quarter of the year is the strongest in every country where we operate due to the significant increase in transactions before the holiday season. The first quarter of the year is generally our slowest period. The months of January, February and March correspond to summer vacation time in Argentina, Brazil, Chile, Peru and Uruguay.
Typically, the fourth quarter of the year is the strongest in terms of revenue in every country where we operate due to the significant increase in transactions before the holiday season. The first quarter of the year is generally our slowest period.
The financial services market is also becoming increasingly competitive with the growth of several fintechs established in Latin America. With respect to our payments’ business, Mercado Pago competes with existing digital and offline payment methods, including banks and other providers of traditional payment methods that service both merchants and individuals.
With respect to our payments’ business, Mercado Pago competes with existing digital and offline payment methods, including banks and other providers of traditional payment methods that service both merchants and individuals.
Our digital payments solution enables any Mercado Libre registered user to securely and easily send and receive digital payments and to pay for purchases made on any of Mercado Libre’s Marketplaces.
Our digital payments solution enables any Mercado Libre registered user to securely and easily send and receive digital payments and to pay for purchases made on any of Mercado Libre’s Marketplaces. Currently, Mercado Pago processes and settles all transactions on our Marketplaces in Argentina, Brazil, Mexico, Colombia, Chile, Uruguay, Peru and Ecuador.
It incentivizes our users to begin to fund their digital wallets with cash as opposed to credit or debit cards given that the return our product offers is greater than traditional checking accounts.
Our asset management product, which is available in Argentina, Brazil, Mexico and Chile, is a critical pillar to build our alternative two-sided network vision. It incentivizes our users to begin to fund their digital wallets with cash as opposed to credit or debit cards given that the return our product offers is greater than traditional checking accounts.
Under the amended regulation, financial institutions in which we deposit customer funds may invest up to 45% of funds that have not already been invested by users in Mercado Fondo in Argentinian, peso-denominated treasury bonds due May 23, 2027.
On September 22, 2022, the CBA modified the aforementioned resolution and established that financial institutions in which the Company deposits customer funds may invest up to 45% of funds that have not already been invested by users in Mercado Fondo in Argentine, peso-denominated treasury bonds due May 23, 2027.
Over the past few years, we have seen competition intensify not only as local players grow their e-commerce businesses, but also as international players expand, mainly in Brazil and Mexico. That said, over the last 12 months, we have seen signs of some local and international players retrenching.
Over the past few years, we have seen competition intensify not only as local players grow their e-commerce businesses, but also as international players expand, mainly in Brazil and Mexico. The financial services market is also becoming increasingly competitive with the growth of several fintechs established in Latin America.
We continued carrying out a complete coverage of promotional campaigns on commercial dates such as Children’s Day, Mother’s Day, Father’s Day, Christmas and dates specific to the e-commerce industry, such as Hot Sale, CyberMonday and Black Friday, leveraging our unique ecosystem of solutions within advertising, Mercado Credito, Mercado Shops and Mercado Envios. 8 Table of Contents Product Development and Technology On December 31, 2022, we had 13,856 employees on our information technology and product development staff, an increase from 9,471 employees on December 31, 2021, due to new hires and as a consequence of improvements in our ecosystem products, which increased our information technology and product development staff.
We continued carrying out a complete coverage of promotional campaigns on commercial dates such as Children’s Day, Mother’s Day, Father’s Day, Christmas and dates specific to the e-commerce industry, such as Hot Sale, CyberMonday, Black Friday and Buen Fin, leveraging our unique ecosystem of solutions within advertising, Mercado Credito, Mercado Shops and Mercado Envios.
In a fast-paced, dynamic, joyful and collaborative environment, we offer people the opportunity to develop through complex challenges, pursuing excellence and achieving outstanding results while working as a team. 11 Table of Contents Over the last two years, as our business thrived, MercadoLibre more than doubled its headcount without losing our distinct culture.
In a fast-paced, dynamic, joyful and collaborative environment, we offer people the opportunity to develop through complex challenges, pursuing excellence and achieving outstanding results while working as a team.
We began first by satisfying the growing demand for online-based payment solutions by providing merchants the necessary digital payment infrastructure for e-commerce to flourish in Latin America. Today, Mercado Pago’s digital payments business allows merchants to facilitate checkout and payment processes on their websites through a branded or white label solution or software development kits.
Today, Mercado Pago’s digital payments business allows merchants to facilitate checkout and payment processes on their websites through a branded or white label solution or software development kits.
This understanding enabled us to more accurately predict their behavior and continue increasing the pace of originations while maintaining levels of uncollectible debt in an acceptable level from a business perspective in 2021 and 2022.
We collect data in our proprietary credit models, which helps us better understand and more accurately predict the behavior of our users, and continue increasing the pace of originations while maintaining levels of uncollectible debt at an acceptable level from a business perspective.
In November 2020, the BACEN approved the application filed by MercadoLibre Inc. for authorization to incorporate a financial institution in the modality of credit, financing and investment corporation (“SCFI”).
Table of Contents Law No. 12,865/2013 prohibits payment institutions from performing activities that are restricted to financial institutions, such as granting loans directly. In November 2020, the BACEN approved the application filed by MercadoLibre Inc. for authorization to incorporate a financial institution in the modality of credit, financing and investment corporation (“SCFI”).
The LGPD establishes detailed rules for the collection, use, processing and storage of personal data and affects all economic sectors, including the relationship between customers and suppliers of goods and services, employees and employers and other relationships in which personal data is collected, whether in a digital or physical environment. 14 Table of Contents (v) Secrecy rules: In addition to regulations affecting payment schemes, Mercado Pago is also subject to laws relating to internet activities and e-commerce, as well as banking secrecy laws, consumer protection laws, tax laws (and related obligations such as the rules governing the sharing of customer information with tax and financial authorities) and other regulations applicable to Brazilian companies generally.
Secrecy rules: In addition to regulations affecting payment schemes, Mercado Pago is also subject to laws relating to internet activities and e-commerce, as well as banking secrecy laws, consumer protection laws, tax laws (and related obligations such as the rules governing the sharing of customer information with tax and financial authorities) and other regulations applicable to Brazilian companies generally.
Risk factors— Intellectual Property Risks — We may not be able to adequately protect and enforce our intellectual property rights.
Risk factors—Intellectual Property Risks—We may not be able to adequately protect and enforce our intellectual property rights. We could potentially face claims alleging that our technologies infringe the property rights of others. 9 | MercadoLibre, Inc.
We inspire people to develop their skills and express their feelings in a healthy and fair environment, where prior beliefs do not determine approval and curiosity allows us to appreciate differences. Our mission regarding diversity and inclusion is focused on three dimensions: ○ The construction of diverse teams, seeking complementary profiles.
Being inclusive makes us more disruptive. We inspire people to develop their skills and express their feelings in a healthy and fair environment, where prior beliefs do not determine approval and curiosity allows us to appreciate differences.
Our registered office is located at 874 Walker Road, Suite C, Dover, Delaware. Our principal executive offices are located at Dr. Luis Bonavita 1294, Of. 1733, Tower II, Montevideo, Uruguay, 11300. Available Information Our Internet address is www.mercadolibre.com . Our investor relations website is investor.mercadolibre.com .
Offices We are a Delaware corporation incorporated on October 15, 1999. Our registered office is located at 800 North State Street, Suite 304, Kent County, Dover, Delaware, 19901. Our principal executive offices are located at Dr. Luis Bonavita 1294, Of. 1733, Tower II, Montevideo, Uruguay, 11300. 16 | MercadoLibre, Inc. Table of Contents Available Information Our Internet address is www.mercadolibre.com.
We could potentially face claims alleging that our technologies infringe the property rights of others .” 10 Table of Contents Human Capital Employees and Labor Relations The following table shows the number of our employees by country as of December 31, 2022: Country Number of Employees Argentina 10,130 Brazil 16,070 Mexico 6,802 Colombia 3,859 Chile 1,941 Uruguay 1,672 Peru 39 Venezuela 21 United States 12 Ecuador 2 Total 40,548 We manage operations in the remaining countries in which we have operations remotely.
Table of Contents Human Capital Employees and Labor Relations The following table shows the number of our employees by country as of December 31, 2023: Country Number of Employees Brazil 22,791 Mexico 16,195 Argentina 10,663 Colombia 4,419 Chile 2,380 Uruguay 1,780 Peru 45 Venezuela 26 United States 10 Ecuador 4 Total 58,313 We manage operations in the remaining countries in which we have operations remotely.
Additionally, the Easter holiday falls in March or April, and Brazil celebrates Carnival for one week in February or March. This first quarter seasonality is partially mitigated by our operations in the countries located in the northern hemisphere, such as Colombia and Mexico, the slowest months for which are the summer months of July, August and September.
This first quarter seasonality is partially mitigated by our operations in the countries located in the northern hemisphere, such as Colombia and Mexico, the slowest months for which are the summer months of July, August and September. Lastly, commercial campaigns like Hot Sale, CyberMonday, Black Friday and Buen Fin generate an increase in transactions.
As we continue to develop Mercado Pago and our peer-to-peer lending business, we may need to comply with regulations applicable to such payments and lending activities and/or anti-money laundering.
After several extensions, on January 11, 2024, the CBA issued a new regulation establishing that the suspension of DEBIN must be effective starting on April 30, 2024. As we continue to develop Mercado Pago and our peer-to-peer lending business, we may need to comply with regulations applicable to such payments and lending activities and/or anti-money laundering.
Consumers can access credit lines through us once we score and approve them through our proprietary models. Loans can be used for a purchase on the Mercado Libre Marketplace, or for any other usage. Since 2019, we also extend personal loans to recurring consumer credit borrowers, allowing them to buy products and services outside of our platform.
Consumers can access credit lines through us once we score and approve them through our proprietary models. Loans can be used for a purchase on the Mercado Libre Marketplace, or on third party sites that use our payments processing technology.
At MercadoLibre, four out of ten employees are women, and women occupy 34% of leadership positions (managers and up), exceeding the market averages in IT in Latin America. We also promote and measure equity in compensation by, among other methods, carrying out a thorough analysis of equal pay to confirm that we do not have a gender pay gap.
We also promote and measure equity in compensation by, among other methods, carrying out a thorough analysis of equal pay to confirm that we do not have a gender pay gap. As a result of these and other diversity initiatives and priorities, women and men of the same seniority enjoy the same income level throughout MercadoLibre.
Developing policies that accompany our employees in their family planning is key at MercadoLibre. In 2018, we became the first company in the region to support women interested in preserving eggs to extend their fertility cycle, covering 70% of the cost of the process.
In 2018, we became the first company in the region to support women interested in preserving eggs to extend their fertility cycle, covering 70% of the cost of the process. Since 2021, all female-identifying employees of MercadoLibre are granted 5 months of paid leave following the birth of a child.
On July 7, 2020, MercadoLibre S.R.L. was registered with the CBA as a payment service provider in accordance with applicable regulations.
On July 7, 2020, MercadoLibre S.R.L. was registered with the CBA as a payment service provider in accordance with applicable regulations. As a non-financial loan provider, since March 1, 2021, we have been required to provide certain information on a monthly basis as part of a new reporting regime.
On June 10, 2019, the Argentine government enacted Law No. 27,506 (knowledge-based economy promotional regime), which established a regime that provides certain tax benefits for companies that meet specific criteria, such as companies that derive at least 70% of their revenues from certain specified activities related to the knowledge-based economy.
Risk factors—Risks related to doing business in Latin America—Local currencies used in the conduct of our business are subject to depreciation, volatility and exchange controls” for more information. In addition, on June 10, 2019, the Argentine government enacted Law No. 27,506 (knowledge-based economy promotional regime), which established a regime that provides certain tax benefits for companies that meet specific criteria.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe occurrence of one or more natural disasters, such as hurricanes, tropical storms, floods, fires, earthquakes, tsunamis, cyclones, typhoons; weather conditions such as major or extended winter storms, droughts and tornadoes, whether as a result of climate change or otherwise; geopolitical events; global health epidemics or pandemics or other contagious outbreaks; and catastrophic events, such as war, civil unrest, terrorist attacks or other acts of violence, including active shooter situations, acts of vandalism or terrorism, labor or trade disputes, and similar events in countries in which we operate, in which our users are located, or in other areas of the world (such as in Ukraine where armed hostilities currently exist between Ukraine and Russia) could adversely affect our operations and financial performance.
Biggest changeNatural disasters, climate change, geopolitical events, global health epidemics or pandemics and catastrophic events could materially adversely affect our financial performance The occurrence of one or more natural disasters, such as hurricanes, tropical storms, floods, fires, earthquakes, tsunamis, cyclones, typhoons; weather conditions such as major or extended winter storms, droughts and tornadoes, whether as a result of climate change or otherwise; geopolitical events (such as international trade disputes and the ongoing conflicts in Ukraine and the Middle East); global health epidemics or pandemics or other contagious outbreaks (such as COVID-19 and its variants); and catastrophic events, such as war, civil unrest, terrorist attacks or other acts of violence, including active shooter situations, acts of vandalism or terrorism, labor or trade disputes, and similar events in countries in which we operate, in which our users are located, or in other areas of the world could adversely affect our operations and financial performance.
Demand for our products and services can fluctuate significantly for many reasons, including due to perceived availability, consumer trends, seasonality, promotions, product launches, defective products or unforeseeable events, such as in response to natural or man-made disasters, public health crises, extreme weather (including as a result of climate change), geopolitical events, or changes in or uncertainty about macro-economic conditions, which could impact the overall volume of transactions on our platforms.
Demand for our products and services can fluctuate significantly for many reasons, including due to perceived availability, consumer trends, seasonality, promotions, product launches, defective products or unforeseeable events, such as in response to natural or man-made disasters, public health crises (including pandemics), extreme weather (including as a result of climate change), geopolitical events, or changes in or uncertainty about macro-economic conditions, which could impact the overall volume of transactions on our platforms.
Changes in laws and regulations regarding crypto-assets, services that involve a partnership with a custodian and blockchain infrastructure providers, as well as the perception of the market regarding this type of asset, may negatively impact our ability to enable our customers to buy, hold and sell crypto-assets in the future and may adversely affect our business.
Changes in laws and regulations regarding such assets, services that involve a partnership with a custodian and blockchain infrastructure providers, as well as the perception of the market regarding this type of asset, may negatively impact our ability to enable our customers to buy, hold and sell crypto-assets in the future and may adversely affect our business.
Although it is difficult to accurately forecast demand, we strive to predict these trends, as overstocking or understocking products we sell could lead to lower sales, missed opportunities, and excessive markdowns, any of which could have a material impact on our business and operating results or reputation.
Although it is difficult to accurately forecast consumer trends and demand, we strive to predict these trends, as overstocking or understocking products we sell could lead to lower sales, missed opportunities, and excessive markdowns, any of which could have a material impact on our business and operating results or reputation.
We assess the credit risk of merchants and/or consumers seeking a loan based on a risk model internally developed, among other factors, which may not accurately predict their creditworthiness due to inaccurate assumptions about the particular merchant and/or consumer or the economic environment or limited product history, among other factors.
We assess the credit risk of merchants and/or consumers seeking a loan based on a risk model internally developed, among other factors, which may not accurately predict their creditworthiness due to inaccurate assumptions about the particular merchant and/or consumer or the economic environment or limited product history, among other aspects.
We also offer Mercado Pago prepaid and credit cards in Brazil under the VISA brand, as well as an electronic payment funds card (equivalent to a debit card) in Mexico and Argentina issued under the MasterCard brand.
We also offer Mercado Pago prepaid cards in Brazil and Mercado Pago credit cards in Brazil and Mexico, all under the VISA brand, as well as an electronic payment funds card (equivalent to a debit card) in Mexico and Argentina issued under the MasterCard brand.
Mercado Pago offers its users in Argentina and Mexico the option to use the balances stored on their Mercado Pago wallets to invest in low-risk investment funds (money market fund equivalents).
Mercado Pago offers its users in Argentina, Mexico and Chile the option to use the balances stored on their Mercado Pago wallets to invest in low-risk investment funds (money market fund equivalents).
However, we are aware that certain goods, such as alcohol, tobacco, firearms, animals, adult material and other goods that may be subject to regulation by local or national authorities of various jurisdictions have been traded by users on the Mercado Libre Marketplace in complete infringement to our policies, bypassing our various security efforts and measures to go undetected.
Table of Contents However, we are aware that certain goods, such as alcohol, tobacco, firearms, animals, adult material and other goods that may be subject to regulation by local or national authorities of various jurisdictions have been traded by users on the Mercado Libre Marketplace in complete infringement to our policies, bypassing our various security efforts and measures to go undetected.
If the condition of the financial services industry deteriorates or becomes weakened for an extended period of time, any of the following factors could have a material adverse effect on our business, operating results, and financial condition: • Disruptions to the capital markets or the banking system may materially adversely affect the value of investments or bank deposits we currently consider safe, liquid or that provide a reasonable return, and we may be unable to find suitable alternative investments, which could result in lower interest income or longer investment horizons; • We may be required to increase the installment and financing fees we charge to customers for purchases made in installments or cease offering installment purchases altogether, each of which may result in a lower volume of transactions completed; • We may be unable to access financing in the credit and capital markets at reasonable rates in the event we find it desirable to do so.
The failure of the financial institutions with which we conduct business may have a material adverse effect on our business, operating results, and financial condition If the condition of the financial services industry deteriorates or becomes weakened for an extended period of time, any of the following factors could have a material adverse effect on our business, operating results, and financial condition: ■ Disruptions to the capital markets or the banking system may materially adversely affect the value of investments or bank deposits we currently consider safe, liquid or that provide a reasonable return, and we may be unable to find suitable alternative investments, which could result in lower interest income or longer investment horizons; ■ We may be required to increase the installment and financing fees we charge to customers for purchases made in installments or cease offering installment purchases altogether, each of which may result in a lower volume of transactions completed; ■ We may be unable to access financing in the credit and capital markets at reasonable rates in the event we find it desirable to do so.
The global financial services and payments industry is continuously changing and increasingly subject to regulatory supervision and continued examination. Some of the payment services offered by our competitors operate at lower commission rates than Mercado Pago’s current rates, which has resulted in market pressures with respect to the commissions we charge for our Mercado Pago services.
Table of Contents The global financial services and payments industry is continuously changing and increasingly subject to regulatory supervision and continued examination. Some of the payment services offered by our competitors operate at lower commission rates than Mercado Pago’s current rates, which has resulted in market pressures with respect to the commissions we charge for our Mercado Pago services.
Such events could result (whether directly or indirectly) in physical damage to, or the complete loss of, one or more of our facilities, loss or spoilage of inventory, limits on our ability to receive the inventories of third parties efficiently and ship orders to customers, business interruption, the lack of an adequate work force in a market, the unavailability of our platforms to our users, changes in the purchasing patterns of consumers and in consumers’ disposable income, the temporary or long-term supply chain and logistics disruption, the disruption of critical infrastructure and communication systems, banking systems, utility services or energy availability.
Such events could result (whether directly or indirectly) in physical damage to, or the complete loss of, one or more of our facilities, loss or spoilage of inventory, limits on our ability to receive the inventories of third parties efficiently and ship orders to customers, business interruption, the lack of an adequate work force in a market, the unavailability of our platforms to our users, changes in the purchasing patterns of consumers and in consumers’ disposable income, the temporary or long-term supply chain and logistics disruption, the disruption of critical infrastructure and communication systems, banking systems, utility services or energy availability. 25 | MercadoLibre, Inc.
Any claims relating to these issues, whether meritorious or not, could cause us to enter into costly royalty and/or licensing agreements. If any of these claims against us are successful we may also have to modify our brand name in certain countries. Any of these circumstances could adversely affect our business, results of operations and financial condition.
Any claims relating to these issues, whether meritorious or not, could cause us to enter into costly royalty and/or licensing agreements. If any of these claims against us are successful we may also have to modify our brand name in certain countries. Any of these circumstances could adversely affect our business, results of operations and financial situation.
We are subject to security breaches or other confidential data theft from our systems, which can adversely affect our reputation and business. A significant risk associated with e-commerce our business is the secure transmission of confidential information over public networks. Our business involves the collection, storage, processing and transmission of customers’ personal data, including financial information.
We are subject to security breaches or other confidential data theft from our systems, which can adversely affect our reputation and business A significant risk associated with our business is the secure transmission of confidential information over public networks. Our business involves the collection, storage, processing and transmission of customers’ personal data, including financial information.
Our information technology and infrastructure, including our source code, and those of third parties with whom we partner have been and may continue to be vulnerable to cyberattacks, security breaches, and third parties may be able to access our customers’ personal or proprietary information and card data that are stored on or accessible through those systems.
Our information technology and infrastructure, including our source code, and those of third parties with whom we partner have been and may continue to be vulnerable to cyberattacks, security breaches, and third parties may be able to access our customers’ personal or proprietary information and, credit and debit card data that are stored on or accessible through those systems.
Our failure or the failure of our partners to manage Mercado Pago users’ funds properly could harm our business. Our ability to manage and account accurately for Mercado Pago users’ funds requires a high level of internal controls. As Mercado Pago continues to grow, we must strengthen our internal controls accordingly.
Table of Contents Our failure or the failure of our partners to manage Mercado Pago users’ funds properly could harm our business Our ability to manage and account accurately for Mercado Pago users’ funds requires a high level of internal controls. As Mercado Pago continues to grow, we must strengthen our internal controls accordingly.
Furthermore, the long-term impacts of climate change, whether involving physical risks (such as extreme weather conditions, drought, or rising sea levels) or transition risks (such as regulatory or technology changes) are expected to be widespread and unpredictable.
Table of Contents Furthermore, the long-term impacts of climate change, whether involving physical risks (such as extreme weather conditions, drought, or rising sea levels) or transition risks (such as regulatory or technology changes) are expected to be widespread and unpredictable.
Users who purchase or sell goods and services through us have increasingly more options and merchants have more channels to reach consumers. Competitors may also be more narrowly focused on a particular type of goods and create a compelling community. 20 Table of Contents We have many competitors in different industries, ranging from large and established companies to emerging start-ups.
Users who purchase or sell goods and services through us have increasingly more options and merchants have more channels to reach consumers. Competitors may also be more narrowly focused on a particular type of goods and create a compelling community. We have many competitors in different industries, ranging from large and established companies to emerging start-ups.
These exchange controls and restrictions could materially adversely affect the business, financial condition and results of operations of our Argentine subsidiaries and their ability to comply with their foreign currency obligations, and could significantly impact our ability to receive cash from our Argentine subsidiaries and our ability to meet our obligations, each of which could have a material adverse effect on our Company.
These exchange controls and restrictions could materially adversely affect the business, financial condition and results of operations of our Argentine subsidiaries and their ability to comply with their foreign currency obligations, and could significantly impact our ability to receive cash from our Argentine subsidiaries and our ability to meet our obligations, each of which could have a material adverse effect on our Company. 31 | MercadoLibre, Inc.
In order to respond to changes in the competitive environment, we may, from time to time, make pricing, service or marketing decisions or acquisitions that may be controversial with and lead to dissatisfaction among some of our sellers, which could reduce activity on our websites and harm our profitability.
In order to respond to changes in the competitive environment, we may, from time to time, make pricing, service or marketing decisions or acquisitions that may be controversial with and lead to dissatisfaction among some of our sellers, which could reduce activity on our websites and harm our profitability. 20 | MercadoLibre, Inc.
Internet Services Regulation There is uncertainty in many of the countries where we operate with respect to the liability of Internet service providers, the application of existing regulations to our business as they relate to, or the enactment of new regulations relating to, issues such as e-commerce, electronic or mobile payments, information requirements for Internet providers, data collection, data protection, on line privacy, cryptocurrencies, artificial intelligence and machine learning (e.g. in relation to risk analysis) governing anti-money laundering, taxation, reporting obligations, consumer protection and businesses.
Internet Services Regulation There is uncertainty in many of the countries where we operate with respect to the liability of Internet service providers, the application of existing regulations to our business as they relate to, or the enactment of new regulations relating to, issues such as e-commerce, electronic or mobile payments, information requirements for Internet providers, data collection, data protection, data security, data localization, online privacy, cryptocurrencies, artificial intelligence and machine learning (e.g. in relation to risk analysis) governing anti-money laundering, taxation, reporting obligations, consumer protection and businesses.
Banking, Money Transmission and Domestic or Cross-Border Electronic Funds Transfer A number of jurisdictions where we operate have enacted legislation regulating money deposits, transmitters and/or electronic payments or funds transfers.
Banking, Money Transmission and Domestic or Cross-Border Electronic Funds Transfer A number of jurisdictions where we operate have enacted legislation regulating money deposits, transmitters, lending activity and/or electronic payments or funds transfers.
In the event that those private keys are lost, destroyed, unable to be accessed or anyway compromised and no back up of such private keys exists, the SPs will not be able to access the tokens or crypto-assets held by our customers in their custody.
In the event that those private keys are lost, destroyed, unable to be accessed or anyway compromised and no back up of such private keys exists, the SPs will not be able to access the tokens or crypto-assets held on behalf of our customers in their custody.
In addition, the SPs’ failure to maintain necessary controls or safeguard against improper transactions due to process or control oversight could lead to sanctions and reputational harm for the Company. The regulatory environment concerning digital assets is uncertain and evolving.
In addition, the SPs’ failure to maintain necessary controls or safeguard against improper transactions due to process or control oversight could lead to sanctions and reputational harm for the Company. The regulatory environment concerning digital assets, including cryptocurrencies and stablecoins, is uncertain and evolving.
The e-commerce and omnichannel retail, e-commerce services, fintech and digital content and electronic devices industries are relatively new in Latin America, rapidly evolving, highly innovative and intensely competitive, and we expect competition to become more intense in the future.
We operate in a highly competitive and evolving environment The e-commerce and omnichannel retail, e-commerce services, fintech and digital content and electronic devices industries are relatively new in Latin America, rapidly evolving, highly innovative and intensely competitive, and we expect competition to become more intense in the future.
Governmental actions to control inflation and other policies and regulations have often involved, among other measures, price controls, currency devaluations, capital controls and limits on imports.
Governmental actions to control inflation and other policies and regulations have often involved, among other measures, price controls, currency devaluations, export duties, capital controls and limits on imports.
Failure or perceived failure to adapt to achieve our goals or commitments, or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners and our stock price.
Table of Contents Failure or perceived failure to adapt to achieve our goals or commitments, or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners and our stock price.
Increased ESG related compliance costs for us as well as among Marketplace merchants and vendors and various other parties within our supply chain could result in increases to our overall operational costs.
Increased ESG related compliance costs for us as well as among Marketplace merchants and vendors and various other parties within our supply chain could result in increases to our overall operational costs. 24 | MercadoLibre, Inc.
We may in the future receive additional requests from sellers requesting reimbursement or threatening legal action against us if we do not reimburse them, the result of which could materially adversely affect our business and financial condition. We continue to build new warehouses to manage increasing demand on our logistics solution.
We may in the future receive additional requests from sellers requesting reimbursement or threatening legal action against us if we do not reimburse them, the result of which could materially adversely affect our business and financial condition. 22 | MercadoLibre, Inc. Table of Contents We continue to build new warehouses to manage increasing demand on our logistics solution.
Competition We may receive scrutiny from various governmental agencies under competition laws in the countries where we operate. Some jurisdictions also provide private rights of action for competitors or consumers to assert claims of anti-competitive conduct. Other companies or governmental agencies may allege that our actions violate antitrust or competition laws, or otherwise constitute unfair competition.
Table of Contents Competition We may receive scrutiny from various governmental agencies under competition laws in the countries where we operate. Some jurisdictions also provide private enforcement actions for competitors or consumers to assert claims of anti-competitive conduct. Other companies or governmental agencies may allege that our actions violate antitrust or competition laws, or otherwise constitute unfair competition.
Any such technical issues could negatively affect our customers’ confidence in our token and the crypto-assets offering through the SPs and on our business. The SPs maintain the cryptographic private keys which allow access to the digital wallets where our customers’ token and crypto-assets are held and custodied.
Any such technical issues could negatively affect our customers’ confidence in our loyalty token program and the crypto-assets offering through the SPs and on our business. The SPs maintain the cryptographic private keys which allow access to the digital wallets where our customers’ token and crypto-assets are held in custody.
Our policies prohibit the sale, storage and/or transport of certain items (both on our platform and/or in our fulfillment centers and/or through third party carriers providing services to Mercado Libre) and we have implemented various actions to monitor and exclude unlawful goods and services from our marketplaces, which we continually work to improve.
Our policies prohibit the sale, storage and/or transport of certain items (both on our platform and/or in our fulfillment centers and/or through third party carriers providing services to Mercado Libre) and we have implemented various actions to monitor and remove unlawful goods and services from our marketplaces, which we continually work to improve. 27 | MercadoLibre, Inc.
We rely on certain technologies that we license from third parties that supply key database technology, operating systems and specific hardware components for our services. We cannot assure you that these technology licenses will continue to be available to us on commercially reasonable terms.
We may not be able to secure licenses for technologies on which we rely We rely on certain technologies that we license from third parties that supply key database technology, operating systems and specific hardware components for our services. We cannot assure you that these technology licenses will continue to be available to us on commercially reasonable terms.
Given that we operate in a business environment in Latin America that is different than the environment in which other e-commerce companies operate, the performance of such other e-commerce companies is not an indication of our future financial performance.
Given that we operate in a business environment in Latin America that is different than the environment in which other companies providing e-commerce and digital financial services operate, the performance of such other companies is not an indication of our future financial performance.
These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. In the future, we may issue securities in connection with investments and acquisitions.
These reports describe, among others, our policies, practices and initiatives across a variety of environmental, social and governance (“ESG”) matters, including our contribution to socio-economic development, diversity, inclusion and financial education, our sustainable development goals and manifesto, and human capital management .
These reports describe, among others, our policies, practices and initiatives across a variety of environmental, social and governance (“ESG”) matters, including our contribution to socio-economic development, diversity, inclusion and financial education, human capital management and efforts to reduce our environmental impact.
Availability, transaction speeds, acceptance, interest and use of the Internet across Latin America are all critical to our growth and services and the occurrence of any one or more of the above challenges to Internet usage could have a material adverse effect on our business. We operate in a highly competitive and evolving environment.
Availability, transaction speeds, acceptance, interest and use of the Internet across Latin America are all critical to our growth and services and the occurrence of any one or more of the above challenges to Internet usage could have a material adverse effect on our business.
However, in 2022 we have not bought additional cryptocurrencies. The prices of digital assets have been and may continue to be highly volatile, including as a result of various associated risks and uncertainties. For example, the prevalence of such assets is a relatively recent development, and their long-term adoption by investors, consumers and businesses is unpredictable.
The prices of digital assets have been and may continue to be highly volatile, including as a result of various associated risks and uncertainties. For example, the prevalence of such assets is a relatively recent development, and their long-term adoption by investors, consumers and businesses is unpredictable.
E-commerce transactions in Latin America may be impeded by the lack of secure payment methods. Unlike in the United States, consumers and merchants in Latin America can be held fully liable for credit card and other losses due to third-party fraud.
Table of Contents Our e-commerce transactions in Latin America may be impacted by the weaknesses of secure payment methods Unlike in the United States, consumers and merchants in Latin America can be held fully liable for credit card and other losses due to third-party fraud.
As a result of these exchange controls, markets in Argentina developed trading mechanisms in which an entity or individual buys U.S. dollar denominated securities in Argentina (e.g. shares, sovereign debt) using Argentine peso, and subsequently sells the securities for U.S. dollars, in Argentina, to access U.S. dollars locally, or outside Argentina, by transferring the securities abroad, prior to being sold (the latter commonly known as Blue Chip Swap Rate). 35 Table of Contents The Blue Chip Swap Rate has diverged significantly from Argentina’s official exchange rate (commonly known as exchange spread).
As a result of these exchange controls, markets in Argentina developed trading mechanisms in which an entity or individual buys U.S. dollar denominated securities in Argentina (e.g. shares, sovereign debt) using Argentine Pesos, and subsequently sells the securities for U.S. dollars, in Argentina, to access U.S. dollars locally, or outside Argentina, by transferring the securities abroad, prior to being sold (the latter commonly known as Blue Chip Swap Rate).
Brazil, Argentina and Mexico, which together accounted for 95.2% and 93.5% of our net revenues for 2022 and 2021, respectively, have experienced volatility and significant devaluations in the past. For the year ended December 31, 2022, the inflation rate in Brazil, Argentina and Mexico was 5.8%, 94.8% and 7.8%, respectively.
Brazil, Argentina and Mexico, which together accounted for 95.5% and 95.2% of our net revenues for 2023 and 2022, respectively, have experienced volatility and significant devaluations in the past. For the year ended December 31, 2023, the inflation rate in Brazil, Argentina and Mexico was 4.6%, 211.4% and 4.7%, respectively.
A number of parties provide services to us or to our users. These services include the hosting of our servers, shipping and the postal and payments infrastructures that allow users to deliver and pay for goods and services, in addition to paying their Mercado Libre Marketplace bills.
Problems that affect our service providers could potentially adversely affect us as well A number of parties provide services to us or to our users. These services include the hosting of our servers, shipping and the postal and payments infrastructures that allow users to deliver and pay for goods and services, in addition to paying their Mercado Libre Marketplace bills.
Risks related to our business and operations Our business depends on the continued growth of online commerce, the commercial and financial activity that our users generate on our platform and the availability and reliability of the Internet in Latin America. Online commerce is still a developing market in Latin America.
RISK FACTORS Risks related to our business and operations Our business depends on the continued growth of online commerce and digital financial services, the commercial and financial activity that our users generate on our platforms and the availability and reliability of the Internet in Latin America Online commerce and digital financial services are still a developing market in Latin America.
In certain countries where we operate, we offer users our Mercado Envios shipping service through integration with local carriers. We generally pay local carriers directly for their shipping costs, and then we decide how much of those costs we transfer to our customers.
We face significant risks related to the ongoing reliability of our logistics network and shipping service In certain countries where we operate, we offer users our Mercado Envios shipping service through integration with local carriers. We generally pay local carriers directly for their shipping costs, and then we decide how much of those costs we transfer to our customers.
Certain provisions of our certificate of incorporation and by-laws may inhibit a change of control that our board of directors does not approve or changes in the composition of our board of directors, which could result in the entrenchment of current management and may delay, defer or prevent a transaction or a change in control that might otherwise be in the best interests of our stockholders.
Risks related to our shares Provisions of our certificate of incorporation and Delaware law could inhibit others from acquiring us, prevent a change of control, and may prevent efforts by our stockholders to change our management Certain provisions of our certificate of incorporation and by-laws may inhibit a change of control that our board of directors does not approve or changes in the composition of our board of directors, which could result in the entrenchment of current management and may delay, defer or prevent a transaction or a change in control that might otherwise be in the best interests of our stockholders.
The implementation of these goals and initiatives may require considerable investments, and the goals set forth in these reports are complex and ambitious and subject to contingencies, dependencies, and in certain cases, reliance on third-party verification and/or performance.
The implementation of these initiatives is complex and subject to contingencies, dependencies, and in certain cases, reliance on third-party verification and/or performance, and may require considerable investments.
Currently, Mercado Pago, if applicable, charges a fee calculated as a percentage of each transaction. If Mercado Pago receives a larger percentage of low ticket transactions, our profit margin may erode, or we may need to raise prices, which, in turn, may affect the volume of transactions.
If Mercado Pago receives a larger percentage of low ticket transactions, our profit margin may erode, or we may need to raise prices, which, in turn, may affect the volume of transactions.
In addition, any downgrades to our credit ratings may affect our ability to obtain additional financing in the future and the terms of any such financing. Any of these factors could adversely affect our financial condition and results of operations. The conditional conversion feature of the 2028 Notes, if triggered, may adversely affect our financial condition and operating results.
In addition, any downgrades to our credit ratings may affect our ability to obtain additional financing in the future and the terms of any such financing. Any of these factors could adversely affect our financial condition and results of operations.
While we have taken steps to make the tokens secure, digital assets in the custody of various other custodians have in the past been hacked or lost, and any users of our tokens that in the future may have similar experiences might try to pursue claims against us, which could affect our customer’s confidence on our digital assets and therefore affect our reputation and results of operations.
In addition, while we have taken steps to make the tokens secure, digital assets in the custody of various other custodians have in the past been hacked or lost, and any users of our tokens that in the future may have similar experiences might try to pursue claims against us.
In all of these cases, if interest rates increase, we may have to raise the installment fees we charge to users that would likely have a negative effect on Mercado Pago’s total payment volume. Changes in Mercado Pago’s funding mix and ticket mix could adversely affect Mercado Pago’s results.
In all of these cases, if interest rates increase, we may have to raise the installment fees we charge to users that would likely have a negative effect on Mercado Pago’s total payment volume.
In addition, public attention to liability issues, lawsuits and legislative proposals could have an adverse impact on our business model and reputation, and consequently on our business results. We may not be able to adequately protect and enforce our intellectual property rights. We could potentially face claims alleging that our technologies infringe the property rights of others.
In addition, public attention to liability issues, lawsuits and legislative proposals could have an adverse impact on our business model and reputation, and consequently on our business results. We may not be able to adequately protect and enforce our intellectual property rights.
Foreign Corrupt Practices Act (“FCPA”) and other applicable U.S. and other local laws prohibiting corrupt payments to government officials and other third parties. 29 Table of Contents Any changes to, enforcement of, failure, or perceived failure to comply with these regulations, or the enactment of new regulations, could result in lawsuits, civil or criminal penalties, or fines against the Company or its subsidiaries, forfeiture of significant assets, an outright or partial restriction on our operations, additional compliance and licensure requirements, an adverse impact on our business, results of operations or financial position, or may otherwise force us to change the way we or our users do business, which could adversely affect the operations and reputation of our businesses in those jurisdictions.
Any changes to, enforcement of, failure, or perceived failure to comply with these regulations, or the enactment of new regulations, could result in lawsuits, civil or criminal penalties, or fines against the Company or its subsidiaries, forfeiture of significant assets, an outright or partial restriction on our operations, additional compliance and licensure requirements, an adverse impact on our business, results of operations or financial position, or may otherwise force us to change the way we or our users do business, which could adversely affect the operations and reputation of our businesses in those jurisdictions.
Any business disruption, litigation, system failure or natural or man-made disaster may cause us to incur substantial costs and divert resources, which could have a material adverse effect on our business, results of operation and financial condition. The continuing effects of the COVID-19 pandemic on our business remain uncertain.
Any business disruption, litigation, system failure or natural or man-made disaster may cause us to incur substantial costs and divert resources, which could have a material adverse effect on our business, results of operation and financial condition. 23 | MercadoLibre, Inc.
Most Latin American countries have historically experienced, and may continue to experience in the future, high rates of inflation, which could lead to further government intervention in the economy, including the introduction of government policies that could adversely affect our results of operations.
Local currencies used in the conduct of our business are subject to depreciation, volatility and exchange controls Most Latin American countries have historically experienced, and may continue to experience in the future, high rates of inflation, which could lead to further government intervention in the economy, including the introduction of government policies that could adversely affect our results of operations.
Mercado Pago pays significant transaction fees when customers fund payment transactions using certain debit and credit cards or through unaffiliated entities, nominal fees when customers fund payment transactions from their bank accounts and no fees when customers fund payment transactions from an existing Mercado Pago account balance.
Changes in Mercado Pago’s funding mix and ticket mix could adversely affect Mercado Pago’s results Mercado Pago pays significant transaction fees when customers fund payment transactions using certain debit and credit cards or through unaffiliated entities, nominal fees when customers fund payment transactions from their bank accounts and no fees when customers fund payment transactions from an existing Mercado Pago account balance.
As a result of the emerging nature and related volatility of the markets and economies in the countries in which we operate, the increased variety of services and products offered on our website and the rapidly evolving nature of our business, it is particularly difficult for us to forecast our revenues or earnings accurately.
The markets in which we operate are rapidly evolving and we may not be able to maintain our profitability As a result of the emerging nature and related volatility of the markets and economies in the countries in which we operate, the increased variety of services and products that we offer and the rapidly evolving nature of our business, it is particularly difficult for us to forecast our revenues or earnings accurately.
Taxation As far as taxation and the digital economy is concerned, many taxing jurisdictions and international organizations are considering changes to tax laws and policies in order to address so-called base erosion and profit shifting.
Taxation As far as taxation and the digital economy is concerned, many taxing jurisdictions and international organizations are moving towards the implementation of changes to tax laws and policies in order to address so-called base erosion, profit shifting and other tax challenges arising from the digitalization of the economy.
If debt financing for potential future acquisitions is unavailable, we may determine to issue shares of our common stock or preferred stock in connection with such an acquisition and any such issuance could result in the dilution of our common stock. We depend on key personnel, the loss of which could have a material adverse effect on us.
If debt financing for potential future acquisitions is unavailable, we may determine to issue shares of our common stock or preferred stock in connection with such an acquisition and any such issuance could result in the dilution of our common stock.
Moreover, uncertainty exists as to whether courts outside of the U.S. would recognize or enforce judgments rendered against us, our subsidiaries, or the above mentioned persons in U.S. courts and predicated on the civil liability provisions of U.S. federal securities laws.
As a result, it may not be possible to effect service of process within the U.S. upon these persons. Moreover, uncertainty exists as to whether courts outside of the U.S. would recognize or enforce judgments rendered against us, our subsidiaries, or the above mentioned persons in U.S. courts and predicated on the civil liability provisions of U.S. federal securities laws.
Reduced foreign investment in any of the countries where we operate may have a negative impact on such country’s economy, affecting interest rates and the ability of companies such as ours to access financial markets. Local currencies used in the conduct of our business are subject to depreciation, volatility and exchange controls.
Reduced foreign investment in any of the countries where we operate may have a negative impact on such country’s economy, affecting interest rates and the ability of companies such as ours to access financial markets.
For the year ended December 31, 2022, 53.8% of our net revenues were denominated in Brazilian Reais, 23.7% in Argentine Pesos and 17.7% in Mexican Pesos. Certain of our subsidiaries may be subject to exchange control regulations that might restrict their ability to convert local currencies into U.S. dollars.
For the year ended December 31, 2023, 52.5% of our net revenues were denominated in Brazilian Real, 22.4% in Argentine Pesos and 20.6% in Mexican Pesos. Certain of our subsidiaries may be subject to exchange control regulations that might restrict their ability to convert local currencies into U.S. dollars.
These limitations may materially affect our competitiveness with respect to other digital integrated conglomerates that do not face the same limitations, thereby impacting our capacity to grow, to innovate and to enter and compete in new markets.
These limitations may prevent the deployment of initiatives for mobile apps, thereby limiting the range of their overall impact. These limitations may materially affect our competitiveness with respect to other digital integrated conglomerates that do not face the same limitations, thereby impacting our capacity to grow, to innovate and to enter and compete in new markets.
Our Mercado Libre and Mercado Pago apps are accessed through third-party platforms, such as Google and Apple’s app stores.
We rely on third-party platforms, such as Google Play and Apple app stores, to access our Mercado Libre and Mercado Pago apps Our Mercado Libre and Mercado Pago apps are accessed through third-party platforms, such as Google and Apple’s app stores.
In addition, any breaches of network or data security of companies we acquire or of our customers, partners or vendors, including parties that provide services to us or to our customers, could have similar negative effects. We may not be able to secure licenses for technologies on which we rely.
In addition, any breaches of network or data security of companies we acquire or of our customers, partners or vendors, including parties that provide services to us or to our customers, could have similar negative effects.
Even though we have business insurance coverage to face major contingencies affecting our services and goods, it may be inadequate to compensate for our losses, its coverage may be limited, or the amount of our insurance may be less than the related loss.
We may have inadequate business insurance coverage, which would require us to spend significant resources in the event of a disruption of our services or other contingency Even though we have business insurance coverage to face major contingencies affecting our services and goods, it may be inadequate to compensate for our losses, its coverage may be limited, or the amount of our insurance may be less than the related loss.
In addition, if changes to the existing terms and conditions interfere with the distribution of our products, if the platforms are unavailable for any prolonged period of time or if we are unable to maintain a good relationship with these third-party providers (including as a result of ongoing or future claims of anticompetitive practices), our business and results of operations could suffer. 21 Table of Contents Our future success depends on our ability to expand and adapt our operations to meet rapidly changing industry and technology standards in a cost-effective and timely manner.
In addition, if changes to the existing terms and conditions interfere with the distribution of our products, if the platforms are unavailable for any prolonged period of time or if we are unable to maintain a good relationship with these third-party providers (including as a result of ongoing or future claims of anticompetitive practices), our business and results of operations could suffer.
A disruption in our relationship with the SPs or in any of the services provided by them to users could adversely affect our customers’ confidence in our loyalty token program, crypto-assets offerings through the SPs and on our business.
We in turn provide a platform that acts as an interface for our customers to access the SPs’ services. A disruption in our relationship with the SPs or in any of the services provided by them to users could adversely affect our customers’ confidence in our loyalty token program, crypto-assets offerings through the SPs and on our business.
These construction efforts are subject to a risk of delay and also to risks relating to the quality of the construction, both of which could increase our costs and impact our ability to grow capacity in time to adequately meet demand. 25 Table of Contents Problems that affect our service providers could potentially adversely affect us as well.
These construction efforts are subject to a risk of delay and also to risks relating to the quality of the construction, both of which could increase our costs and impact our ability to grow capacity in time to adequately meet demand.
This involvement, as well as political and economic conditions, could adversely affect our business. Governments in Latin America frequently intervene in the economies of their respective countries and occasionally make significant changes in policy and regulations.
Table of Contents Latin American governments have exercised and continue to exercise significant influence over the economies of the countries where we operate. This involvement, as well as political and economic conditions, could adversely affect our business Governments in Latin America frequently intervene in the economies of their respective countries and occasionally make significant changes in policy and regulations.
A s such, we cannot guarantee that we will achieve any of these goals, including, but not limited to, the Company’s intention to allocate the proceeds from the sale of the Sustainable Bond to eligible projects meeting the criteria and within the time frame described in our Framework.
As such, we cannot guarantee that we will be able to execute any of these initiatives, including, but not limited to, the Company’s intention to allocate the proceeds from the sale of the 2026 Sustainability Notes to eligible projects meeting the criteria and within the time frame described in our Framework.
Because of the novelty of digital assets, there is potential regulatory uncertainty about the legal and accounting treatment of the tokens issued in connection with the loyalty program in different jurisdictions, which could limit our ability to roll out or continue the program successfully.
Because of the novelty of digital assets, there is regulatory uncertainty about the legal and accounting treatment of the tokens issued in connection with the loyalty program in certain jurisdictions, which has and may continue to limit our ability to roll out the program in new jurisdictions or continue it successfully or at all under its current terms.
Our business is subject to the laws, rules, regulations and policies of the countries in which we operate, as well as the legal interpretation of such regulations by administrative bodies and the judiciary of those countries, including, but not limited to, those listed below.
Failure to comply with existing and future rules and regulations in the jurisdictions in which we operate could adversely affect the operations of one or more of our businesses in those jurisdictions Our business is subject to the laws, rules, regulations and policies of the countries in which we operate, as well as the legal interpretation of such regulations by administrative bodies and the judiciary of those countries, including, but not limited to, those listed below.
Our licensees may take actions that could affect the value of our proprietary rights or reputation, which could have a material adverse effect on our business, results of operations and financial condition.
Our licensees may take actions that could affect the value of our proprietary rights or reputation, which could have a material adverse effect on our business, results of operations and financial condition. Our company extensively utilizes open source software (“OSS”), presenting significant intellectual property challenges.
The funding and growth of our Mercado Credito business is directly related to interest rates; a rise in interest rates may negatively affect our Mercado Credito business and results of operations. We face significant risks related to the ongoing reliability of our logistics network and shipping service.
The funding and growth of our Mercado Credito business is directly related to interest rates; a rise in interest rates may negatively affect our Mercado Credito business and results of operations.
Further, our repurchases could affect our share trading prices, increase their volatility, reduce our cash reserves and may be suspended or terminated at any time, which may result in a decrease in the trading of our stock. ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable.
Our repurchase programs may not require us to repurchase any specific required dollar amount or number of shares. Further, our repurchases could affect our share trading prices, increase their volatility, reduce our cash reserves and may be suspended or terminated at any time, which may result in a decrease in the trading of our stock. ITEM 1B.
Customers may prefer to pay using credit cards rather than bank account transfers for a number of reasons, including the ability to pay in installments, the ability to dispute and reverse charges, the ability to earn frequent flyer miles or other incentives offered by credit cards, the ability to defer payment, or a reluctance to provide bank account information to us. 24 Table of Contents Certain costs and transactions fees that Mercado Pago pays in connection with certain payment methods are fixed regardless of the ticket price.
Customers may prefer to pay using credit cards rather than bank account transfers for a number of reasons, including the ability to pay in installments, the ability to dispute and reverse charges, the ability to earn frequent flyer miles or other incentives offered by credit cards, the ability to defer payment, or a reluctance to provide bank account information to us.
The terms of our senior unsecured notes issued in January 2021 and certain collateralized debt under securitization transactions contain, and any debt instruments we enter in the future may contain, covenants that restrict or could restrict, among other things, our business and operations.
Table of Contents Our debt instruments contain restrictions that limit our flexibility in operating our business, and changes by any rating agency to our outlook or credit rating could negatively affect us The terms of our senior unsecured notes issued in January 2021 and certain collateralized debt under securitization transactions contain, and any debt instruments we enter in the future may contain, covenants that restrict or could restrict, among other things, our business and operations.
We may need to raise additional funds in order to fund more rapid expansion (organically or through strategic acquisitions), to develop new or enhanced services or products, to respond to competitive pressures or to acquire complementary products, businesses or technologies.
We may require additional capital in the future, and this additional capital may not be available on acceptable terms or at all We may need to raise additional funds in order to fund more rapid expansion (organically or through strategic acquisitions), to develop new or enhanced services or products, to respond to competitive pressures or to acquire complementary products, businesses or technologies.
We anticipate that we may continue to be nominated or included in these and/or any other similar lists, and receive legal claims from content and IP owners alleging violations of their IP rights, which could result in substantial monetary awards, penalties or costly injunctions against us, as well as adversely affect our reputation.
We have also received, and anticipate that we may continue to receive, legal claims from content and IP owners alleging violations of their IP rights and also from users affected by listing takedowns and account restrictions, which could result in substantial monetary awards, penalties or costly injunctions against us, as well as adversely affect our reputation.
In 2022 and 2021, installment payments represented 19.8% and 24.8%, respectively, of Mercado Pago’s total payment volume. To subsidize the cost of the installment payment feature, from time to time we pay interest to discount credit card receivables, securitize credit card receivables through trusts or finance Mercado Pago business through financial debt.
To subsidize the cost of the installment payment feature, from time to time we pay interest to discount credit card receivables, securitize credit card receivables through trusts or finance Mercado Pago business through financial debt.
Although economic and political conditions may differ from one country to another, we cannot assure you that events in one country alone will not adversely affect our business, financial condition or the market value of our common stock. Latin American governments have exercised and continue to exercise significant influence over the economies of the countries where we operate.
Although economic and political conditions may differ from one country to another, we cannot assure you that events in one country alone will not adversely affect our business, financial condition or the market value of our common stock. 30 | MercadoLibre, Inc.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of December 31, 2022, our owned and leased facilities (excluding data centers) provided us with square meters as follows: Argentina Brazil Mexico Others Total Owned facilities 5,565 — — 880 6,445 Leased facilities 101,734 840,470 665,024 117,313 1,724,541 Managed by Third Parties (*) 26,523 393,993 — 97,133 517,649 Total facilities 133,822 1,234,463 665,024 215,326 2,248,635 (*) Includes properties that are leased by the Company and managed by third parties.
Biggest changeAs of December 31, 2023, our owned and leased facilities (excluding data centers) provided us with square meters as follows: Argentina Brazil Mexico Others Total Owned facilities 13,918 — — 880 14,798 Leased facilities 96,974 1,085,900 924,660 89,555 2,197,089 Managed by Third Parties (1) 57,223 536,627 — 92,520 686,370 Total facilities 168,115 1,622,527 924,660 182,955 2,898,257 (1) Includes properties that are leased by the Company and managed by third parties.
Removed
ITEM 3. LEGAL PROCEEDINGS Please refer to Item 8 of Part II, “Financial Statements and Supplementary Data”—Note 15 Commitments and Contingencies—Litigation and Other Legal Matters. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSecurity Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters.” Issuer Purchases of Equity Securities Period Total Number of Shares Purchased (2) Average Price per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Program (in millions) (2) October, 2022 — — — Up to $114 November, 2022 7,116 1,865.75 7,116 Up to $101 December, 2022 30,027 1,768.69 30,027 Up to $48 (1) Average price paid per share does not include costs associated with the repurchase s.
Biggest changeSecurity Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters.” Issuer Purchases of Equity Securities Period Total Number of Shares Purchased Average Price per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Program (in millions) (1) October, 2023 — — — Up to $157 November, 2023 — — — Up to $157 December, 2023 — — — Up to $157 (1) On February 21, 2023, the Board authorized the Company to repurchase shares of the Company’s common stock, for aggregate consideration of up to $900 million to expire on March 31, 2024 (the “Program”).
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Shares of our common stock, par value $0.001 per share, trade on the Nasdaq Global Select Market (“NASDAQ”) under the symbol “MELI”.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market information for Common Stock Shares of our common stock, par value $0.001 per share, trade on the Nasdaq Global Select Market (“NASDAQ”) under the symbol “MELI”.
Dividend Policy After reviewing the Company’s capital allocation process, the board of directors has concluded that it has multiple investment opportunities that can generate greater return to shareholders through investing capital into the business over a dividend policy. Consequently, the board of directors suspended the payment of dividend to shareholders as from the first quarter of 2018.
Dividend Policy After reviewing the Company’s capital allocation process, the board of directors has concluded that it has multiple investment opportunities that can generate greater return to shareholders through investing capital into the business over a dividend policy.
Please refer to Note 25 of our audited consolidated financial statements for additional detail. 38 Table of Contents Stock Performance Graph The graph below shows the total stockholder return of an investment of $100 on December 31, 2017 through December 31, 2022 for (i) our common stock; (ii) The Nasdaq Composite Index; (iii) The S&P 500 Index; and (iv) the Dow Jones Industrial Average Index.
Stock Performance Graph The graph below shows the total stockholder return of an investment of $100 on December 31, 2018 through December 31, 2023 for (i) our common stock; (ii) The Nasdaq Composite Index; (iii) The S&P 500 Index; and (iv) the Dow Jones Industrial Average Index.
Equity Compensation Plan Information Information regarding securities authorized for issuance under the Company’s equity compensation plan as of December 31, 2022 is set forth in “Item 12.
Consequently, the board of directors suspended the payment of dividend to shareholders as from the first quarter of 2018. 34 | MercadoLibre, Inc. Table of Contents Equity Compensation Plan Information Information regarding securities authorized for issuance under the Company’s equity compensation plan as of December 31, 2023 is set forth in “Item 12.
As of December 31, 2022, the closing price of our common stock was $846.24 per share. 37 Table of Contents Holders of record As of January 31, 2023, we had 198 holders of record of our common stock. This figure does not reflect the beneficial ownership of shares held in nominee name.
Holders of record As of January 31, 2024, we had 198 holders of record of our common stock. This figure does not reflect the beneficial ownership of shares held in nominee name. Recent Sales of Unregistered Securities There were no sales of unregistered securities by us during the year ended December 31, 2023.
On March 1, 2022,the Board also authorized a new extension of the term of the Existing Program, from August 31, 2022 to August 31, 2023 . As of December 31, 2022, the estimated remaining balance available for share repurchases under this Existing Program was $48 million .
As of December 31, 2023, the estimated remaining balance available for share repurchases under this Program was $157 million. Please refer to Note 25 – Share repurchase program of our audited consolidated financial statements for additional detail.
Removed
The following table sets forth, for the indicated periods, the high and low per share sale prices for our common stock on the Nasdaq Global Select Market: High Low 2022 1st quarter $ 1,332.94 $ 882.47 2nd quarter $ 1,265.01 $ 612.70 3rd quarter $ 1,082.66 $ 653.63 4th quarter $ 1,020.68 $ 756.88 2021 1st quarter $ 1,984.34 $ 1,369.54 2nd quarter $ 1,623.01 $ 1,296.65 3rd quarter $ 1,953.83 $ 1,497.27 4th quarter $ 1,709.98 $ 1,052.95 Recent Sales of Unregistered Securities There were no sales of unregistered securities by us during the year ended December 31, 2022.
Removed
It includes the foreign exchange loss recognized for the year ended December 31, 2022 . Please refer to Note 25 of our audited consolidated financial statements for additional detail. (2) On August 4, 2021, the Board authorized the Company to repurchase shares of the Company’s common stock, for aggregate consideration of up to $150 million .
Removed
This authorization was scheduled to expire on August 31, 2022. On March 1, 2022, the Board authorized an increase in that authorization of $300 million, from an aggregate consideration of up to $150 million to an aggregate consideration of up to $450 million (the “Existing Program”).
Removed
On February 21, 2023, the Board terminated the Existing Program and authorized a new program to repurchase shares of the Company’s common stock, for aggregate consideration of up to $900 million to expire on March 31, 2024 (the "Program").

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

129 edited+56 added−29 removed68 unchanged
Biggest change(In millions, except for percentages) Year Ended December 31, 2022 Brazil Argentina Mexico Other Countries Total Net revenues $ 5,666 $ 2,500 $ 1,864 $ 507 $ 10,537 Direct costs (4,717) (1,488) (1,579) (481) (8,265) Direct contribution $ 949 $ 1,012 $ 285 $ 26 $ 2,272 Direct contribution margin 16.7% 40.5% 15.3% 5.1% 21.6% Year Ended December 31, 2021 Brazil Argentina Mexico Other Countries Total Net revenues $ 3,910 $ 1,531 $ 1,172 $ 456 $ 7,069 Direct costs (3,233) (998) (1,139) (380) (5,750) Direct contribution $ 677 $ 533 $ 33 $ 76 $ 1,319 Direct contribution margin 17.3% 34.8% 2.9% 16.6% 18.7% 57 Table of Contents Change from the Year Ended December 31, 2021 to December 31, 2022 Brazil Argentina Mexico Other Countries Total Net revenues in Dollars $ 1,756 $ 969 $ 692 $ 51 $ 3,468 in % 44.9% 63.3% 59.0% 11.2% 49.1% Direct costs in Dollars $ (1,484) $ (490) $ (440) $ (101) $ (2,515) in % 45.9% 49.1% 38.6% 26.6% 43.7% Direct contribution in Dollars $ 272 $ 479 $ 252 $ (50) $ 953 in % 40.2% 89.9% 763.6% -65.8 % 72.3% (In millions, except for percentages) Year Ended December 31, 2021 Brazil Argentina Mexico Other Countries Total Net revenues $ 3,910 $ 1,531 $ 1,172 $ 456 $ 7,069 Direct costs (3,233) (998) (1,139) (380) (5,750) Direct contribution $ 677 $ 533 $ 33 $ 76 $ 1,319 Direct contribution margin 17.3% 34.8% 2.9% 16.6% 18.7% Year Ended December 31, 2020 Brazil Argentina Mexico Other Countries Total Net revenues $ 2,194 $ 980 $ 575 $ 225 $ 3,974 Direct costs (1,766) (709) (586) (186) (3,247) Direct contribution $ 428 $ 271 $ (11) $ 39 $ 727 Direct contribution margin 19.5% 27.7% -1.9% 16.8% 18.3% Change from the Year Ended December 31, 2020 to December 31, 2021 Brazil Argentina Mexico Other Countries Total Net revenues in Dollars $ 1,716 $ 551 $ 597 $ 231 $ 3,095 in % 78.2% 56.2% 103.8% 103.8% 77.9% Direct costs in Dollars $ (1,467) $ (289) $ (553) $ (194) $ (2,503) in % 83.1% 40.8% 94.3% 104.1% 77.1% Direct contribution in Dollars $ 249 $ 262 $ 44 $ 37 $ 592 in % 58.0% 96.3% 408.8% 102.2 % 81.6% Net revenues Net revenues for the years ended December 31, 2022, 2021 and 2020 are described above in “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Net revenues”. 58 Table of Contents Direct costs Brazil For the year ended December 31, 2022, as compared to 2021, the increase in direct costs was mainly driven by: i) a $791 million increase in cost of net revenues, mainly attributable to an increase in shipping operating costs, sales taxes, collection fees as a consequence of the higher transactions volume of our Mercado Pago business, hosting expenses and other payments costs mainly due to higher funding cost related to our credits business; ii) a $443 million increase in the provision for doubtful accounts mainly due to a combination effect generated by higher originations of loans during 2022, particularly, consumers and credit cards portfolio, and an increase of the non-performing ratio of the total portfolio relating to the over-90-day bucket in comparison with the previous years; iii) $134 million increase in sales and marketing expenses, mainly due to an increase in buyer protection program expenses, online and offline marketing expenses, salaries and wages, chargebacks and other sales expenses; iv) $71 million increase in product and development expenses, mostly attributable to an increase in depreciation and amortization expenses, maintenance expenses mainly related to higher software licenses expenses and other expenses mainly related to certain tax withholding; and v) a $45 million increase in general and administrative expenses, mostly attributable to an increase in other general and administrative expenses mainly related to certain tax withholding, temporary services primarily related to administrative workers, depreciation and amortization expenses, salaries mainly related to new hires and legal and other fees.
Biggest changeTable of Contents Year Ended December 31, 2022 Brazil Argentina Mexico Other Countries Total (In millions, except for percentages) Net revenues $ 5,666 $ 2,500 $ 1,864 $ 507 $ 10,537 Direct costs (4,717) (1,488) (1,579) (481) (8,265) Direct contribution $ 949 $ 1,012 $ 285 $ 26 $ 2,272 Direct contribution margin 16.7% 40.5% 15.3% 5.1% 21.6% Year Ended December 31, 2021 Brazil Argentina Mexico Other Countries Total (In millions, except for percentages) Net revenues $ 3,910 $ 1,531 $ 1,172 $ 456 $ 7,069 Direct costs (3,233) (998) (1,139) (380) (5,750) Direct contribution $ 677 $ 533 $ 33 $ 76 $ 1,319 Direct contribution margin 17.3% 34.8% 2.9% 16.6% 18.7% Change from the Year Ended December 31, 2021 to December 31, 2022 Brazil Argentina Mexico Other Countries Total (In millions, except for percentages) Net revenues in Dollars $ 1,756 $ 969 $ 692 $ 51 $ 3,468 in % 44.9% 63.3% 59.0% 11.2% 49.1% Direct costs in Dollars $ (1,484) $ (490) $ (440) $ (101) $ (2,515) in % 45.9% 49.1% 38.6% 26.6% 43.7% Direct contribution in Dollars $ 272 $ 479 $ 252 $ (50) $ 953 in % 40.2% 89.9% 763.6% (65.8 %) 72.3% Net revenues Net revenues for the years ended December 31, 2023, 2022 and 2021 are described above in “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Net revenues”.
(1) New or existing user who performed at least one of the following actions during the reported period: (1) made one purchase, or reservation, or asked one question on Mercado Libre Marketplace or Classified Marketplace (2) maintained an active listing on Mercado Libre Marketplace or Classified Marketplace (3) maintained an active account in Mercado Shops (4) made a payment, money transfer, collection and/or advance using Mercado Pago (5) maintained an outstanding credit line through Mercado Credito or (6) maintained a balance of more than $5 invested in a Mercado Fondo asset management account.
(2) New or existing user who performed at least one of the following actions during the reported period: (1) made one purchase, or reservation, or asked one question on Mercado Libre Marketplace or Classified Marketplace (2) maintained an active listing on Mercado Libre Marketplace or Classified Marketplace (3) maintained an active account in Mercado Shops (4) made a payment, money transfer, collection and/or advance using Mercado Pago (5) maintained an outstanding credit line through Mercado Credito or (6) maintained a balance of more than $5 invested in a Mercado Fondo asset management account.
Our board of directors suspended the payment of dividends on our common stock as of the first quarter of 2018 after reviewing our capital allocation process and concluding that we have multiple investment opportunities that should generate greater returns to shareholders through investing capital into the business as compared to paying dividends.
Cash Dividends Our board of directors suspended the payment of dividends on our common stock as of the first quarter of 2018 after reviewing our capital allocation process and concluding that we have multiple investment opportunities that should generate greater returns to shareholders through investing capital into the business as compared to paying dividends.
We believe that product development is one of our key competitive advantages and we intend to continue to invest in hiring engineers to meet the increasingly sophisticated product expectations of our customer base.
We believe that product and technology development is one of our key competitive advantages and we intend to continue to invest in hiring engineers to meet the increasingly sophisticated product expectations of our customer base.
For discussion on results from 2021 compared to 2020, please refer to “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2021. Certain monetary amounts included elsewhere in this document have been subject to rounding adjustments.
For discussion on results from 2022 compared to 2021, please refer to “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2022. Certain monetary amounts included elsewhere in this document have been subject to rounding adjustments.
Risk Factors - Risk related to doing business in Latin America - Local currencies used in the conduct of our business are subject to depreciation, volatility and exchange controls".
Risk Factors - Risks related to doing business in Latin America - Local currencies used in the conduct of our business are subject to depreciation, volatility and exchange controls".
Liquidity and Capital Resources Our main cash requirement has been working capital to fund Mercado Pago financing operations. We also require cash to fund our credits business, for capital expenditures relating to technology infrastructure, software applications, office space, business acquisitions, to build out our logistics capacity and to make interest payments on our loans payable and other financial liabilities.
Liquidity and Capital Resources Our main cash requirement has been working capital to fund Mercado Pago financing operations and our credit business. We also require cash for capital expenditures relating to technology infrastructure, software applications, office space, business acquisitions, to build out our logistics capacity and to make interest payments on our loans payable and other financial liabilities.
With the changes in our businesses we believe it provides a better indication of our active user base rather than our discontinued registration metric that did not reflect any sort of interaction. (2) Total U.S. dollar sum of all transactions completed through the Mercado Libre Marketplace, excluding Classifieds transactions.
With the changes in our businesses we believe it provides a better indication of our active user base rather than our discontinued registration metric that did not reflect any sort of interaction. (3) Total U.S. dollar sum of all transactions completed through the Mercado Libre Marketplace, excluding Classifieds transactions.
The FX neutral measures were calculated by using the average monthly exchange rates for each month during 2021 and applying them to the corresponding months in 2022, so as to calculate what our results would have been had exchange rates remained stable from one year to the next.
The FX neutral measures were calculated by using the average monthly exchange rates for each month during 2022 and applying them to the corresponding months in 2023, so as to calculate what our results would have been had exchange rates remained stable from one year to the next.
As we continue to grow and focus on expanding our leadership in the region, we will continue to invest in product development, sales and marketing and human resources in order to promote our services and capture long-term business opportunities. As a result, we may experience decreases in our operating margins.
As we continue to grow and focus on expanding our leadership in the region, we will continue to invest in product and technology development, sales and marketing and human resources in order to promote our services and capture long-term business opportunities. As a result, we may experience decreases in our operating income margins.
Our operating margin is affected by our operating expenses structure, which mainly consists of our employees’ salaries, our sales and marketing expenses related to those activities we incurred to promote our services, provision for doubtful accounts mainly related to our loans receivable portfolio and product development expenses, among other operating expenses.
Our operating income margin is affected by our operating expenses structure, which mainly consists of our employees’ salaries, our sales and marketing expenses related to those activities we incurred to promote our services, provision for doubtful accounts mainly related to our loans receivable portfolio and product and technology development expenses, among other operating expenses.
The tax effect of these temporary differences and the estimated tax benefit from our tax net operating losses are reported as deferred tax assets and liabilities in our consolidated balance sheet. We also assess the likelihood that our net deferred tax assets will be realized from future taxable income.
The tax effect of these temporary differences and the estimated tax benefit from our tax net operating losses are reported as deferred tax assets and liabilities in our consolidated balance sheets. We also assess the likelihood that our net deferred tax assets will be realized from future taxable income.
(3) Number of items that were sold/purchased through the Mercado Libre Marketplace, excluding Classifieds items. (4) Number of items that were shipped through our shipping service. (5) Total U.S. dollar sum of all transactions paid for using Mercado Pago, including marketplace and non-marketplace transactions. (6) Total U.S. dollar sum of all marketplace transactions paid for using Mercado Pago.
(4) Number of items that were sold/purchased through the Mercado Libre Marketplace, excluding Classifieds items. (5) Number of items that were shipped through our shipping service. (6) Total U.S. dollar sum of all transactions paid for using Mercado Pago, including marketplace and non-marketplace transactions. (7) Total U.S. dollar sum of all marketplace transactions paid for using Mercado Pago.
Segment information See Note 9 “Segments” of our audited consolidated financial statements for detailed description about our reporting segments.
Segment information See Note 9 – Segments of our audited consolidated financial statements for detailed description about our reporting segments.
The comparative FX neutral measures were calculated by using the average monthly exchange rates for each month during 2020 and applying them to the corresponding months in 2021. The table below excludes intercompany allocation FX effects.
The comparative FX neutral measures were calculated by using the average monthly exchange rates for each month during 2021 and applying them to the corresponding months in 2022.The table below excludes intercompany allocation FX effects.
We and certain financial institutions participate in a supplier finance program (“SFP”) that enables certain of our suppliers, at their own election, to request the payment of their invoices to the financial institutions earlier than the terms stated in our payment policy.
We and certain financial institutions participate in a supplier finance program (“SFP”) that enables certain of our suppliers, at their own election, to request the payment of their invoices to the financial institutions earlier than the terms stated in our payment policies.
Legal contingencies In connection with certain pending litigation and other claims, we have estimated the range of probable loss and provided for such losses through charges to our consolidated statement of income.
Legal contingencies In connection with certain pending litigation and other claims, we have estimated the range of probable loss and provided for such losses through charges to our consolidated statements of income.
Through Mercado Pago, we brought trust to the merchant customer relationship, allowing online consumers to shop easily and safely, while giving them the confidence to share sensitive personal and financial data with us. Finally, we have also deepened our fintech offerings by growing our online-to-offline (“O2O”) products and services.
Through Mercado Pago, we brought trust to the merchant customer relationship, allowing online consumers to shop easily and safely, while giving them the confidence to share sensitive personal and financial data with us. Finally, we have also deepened our fintech offerings by growing our online-to-offline (“O2O”) products and services. 36 | MercadoLibre, Inc.
(**) The local currency revenue growth was calculated by using the average monthly exchange rates for each month during 2020 and applying them to the corresponding months in 2021, so as to calculate what our financial results would have been had exchange rates remained stable from one year to the next.
(2) The local currency revenue growth was calculated by using the average monthly exchange rates for each month during 2021 and applying them to the corresponding months in 2022, so as to calculate what our financial results would have been had exchange rates remained stable from one year to the next.
In the future, our gross profit margin could decline if we continue growing our sales of goods business, which has a lower pure product margin, building up our logistics network and if we fail to maintain an appropriate relationship between our cost of revenue structure and our net revenues trend.
In the future, our gross profit margin could decline if we continue growing our sales of goods business, which has a lower pure product margin, building up our logistics network and if we fail to maintain an appropriate relationship between our cost of revenue structure and our net revenues trend. 42 | MercadoLibre, Inc.
We believe that our existing cash and cash equivalents, including the sale of credit card receivables, short-term investments and cash generated from operations, will be sufficient to fund our operating activities, property and equipment expenditures and to pay or repay obligations in the foreseeable future.
We believe that our existing cash and cash equivalents, including the sale of credit card receivables, short-term investments and cash generated from operations, will be sufficient to fund our operating activities, property and equipment expenditures and to pay or repay obligations in the foreseeable future. 54 | MercadoLibre, Inc.
Our subsidiaries in Brazil, Argentina and Colombia are subject to certain taxes on revenues which are classified as a cost of net revenues. These taxes represented 7.5%, 8.0% and 8.2% of net revenues for the years ended December 31, 2022, 2021 and 2020, respectively.
Our subsidiaries in Brazil, Argentina and Colombia are subject to certain taxes on revenues, which are classified as a cost of net revenues. These taxes represented 7.7%, 7.5% and 8.0% of net revenues for the years ended December 31, 2023, 2022 and 2021, respectively.
Considering a hypothetical increase in the probability of default of 10%, we would have recognized an increase in our allowance for doubtful accounts for loans receivable of approximately $25 million.
Considering a hypothetical increase in the probability of default of 10%, we would have recognized an increase in our allowance for doubtful accounts for loans receivable of approximately $34 million.
Our future effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates, by changes in the valuations of our deferred tax assets or liabilities, or by changes or interpretations in tax laws, regulations or accounting principles.
Our future effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates, by changes in the valuations of our deferred tax assets or liabilities, or by changes or interpretations in tax laws, regulations or accounting principles. 47 | MercadoLibre, Inc.
To the extent we establish a valuation allowance or change the allowance in a period, we reflect the change with a corresponding increase or decrease in our tax provision in our consolidated statement of income.
To the extent we establish a valuation allowance or change the allowance in a period, we reflect the change with a corresponding increase or decrease in our tax provision in our consolidated statements of income.
As an extension of our asset management and savings solutions for users, we launched a digital assets feature as part of the Mercado Pago wallet in Brazil in 2021 and in Mexico in 2022.
As an extension of our asset management and savings solutions for users, we launched a digital assets feature as part of the Mercado Pago wallet in Brazil, Mexico and Chile, in 2021, 2022 and 2023, respectively.
Although we also process payments on the Marketplace, we do not charge sellers an added commission for this service, as it is already included in the Marketplace final value fee that we charge.
Table of Contents Although we also process payments on the Marketplace, we do not charge sellers an added commission for this service, as it is already included in the Marketplace final value fee that we charge.
The Mercado Envios logistics solution enables sellers on our platform to utilize third-party carriers and other logistics service providers, while also providing them with fulfillment and warehousing services.
Table of Contents The Mercado Envios logistics solution enables sellers on our platform to utilize third-party carriers and other logistics service providers, while also providing them with fulfillment and warehousing services.
Sales and marketing expenses Our sales and marketing expenses consist primarily of costs related to marketing our platforms through online and offline advertising and agreements with portals, search engines and other sales expenses related to strategic marketing initiatives, charges related to our buyer protection program, the salaries of employees involved in these activities, chargebacks related to our Mercado Pago operations, branding initiatives, marketing activities for our users and depreciation and amortization expenses.
Sales and marketing expenses Our sales and marketing expenses consist primarily of costs related to marketing our platforms through online and offline advertising and agreements with portals, search engines and other sales expenses related to strategic marketing initiatives, charges related to our buyer protection program, the salaries of employees involved in these activities (including long term retention program compensation), chargebacks related to our Mercado Pago operations, branding initiatives, marketing activities for our users and depreciation and amortization expenses.
The aggregate proceeds of the equity offering were $1,520 million net of issuance costs paid. See Note 22 of our audited consolidated financial statements for additional information regarding our equity offerings. Finally, on March 31, 2022, we entered into a $400 million revolving credit arrangement (“the Credit Arrangement”).
The aggregate proceeds of the equity offering were $1,520 million net of issuance costs paid. See Note 22 – Equity Offering of our audited consolidated financial statements for additional information regarding our equity offerings. 50 | MercadoLibre, Inc. Table of Contents Finally, on March 31, 2022, we entered into a $400 million revolving credit arrangement (“the Credit Arrangement”).
For an analysis of our Critical Accounting Policies and Estimates please refer to Note 2 “Summary of significant accounting policies ” to our audited consolidated financial statements included elsewhere in this report.
For an analysis of our Critical Accounting Policies and Estimates please refer to Note 2 – Summary of significant accounting policies to our audited consolidated financial statements included elsewhere in this report.
This increase was partially offset by a $127 million increase in interest income and other financial gains from our financial investments as a result of higher interest income due to higher float and rates in Brazil.
This increase was partially offset by a $458 million increase in interest income and other financial gains from our financial investments, primarily as a result of higher interest income due to higher float and rates in Brazil and Argentina.
During the year ended December 31, 2022, we invested $209 million in information technology in Brazil, Argentina and Mexico, and $211 million in our Argentine, Brazilian and Mexican shipping premises and offices. We are continually increasing our level of investment in hardware and software licenses necessary to improve and update our platform’s technology and our computer software developed internally.
During the year ended December 31, 2023, we invested $225 million in information and technology assets in Brazil, Argentina and Mexico, and $233 million in our Argentine, Brazilian and Mexican shipping premises and offices. We are continually increasing our level of investment in hardware and software licenses necessary to improve and update our platform’s technology and computer software developed internally.
Our advertising platform, Mercado Ads, enables businesses to promote their products and services on the Internet. Through our advertising platform, MercadoLibre’s brands and sellers are able to display ads on our webpages through product searches, banner ads, or suggested products.
Our advertising platform, Mercado Ads, enables businesses to promote their products and services on the Mercado Libre Marketplace and Mercado Pago Fintech platform. Through our advertising platform, MercadoLibre’s brands and sellers are able to display ads on our webpages through product searches, banner ads, or suggested products.
The measurement of CECL is based on probability-weighted scenarios (probability of default for each month), in view of past events, current conditions and adjustments to reflect the reasonable and supportable forecast of future economic conditions.
The measurement of the current expected credit losses (“CECL”) is based on probability-weighted scenarios (probability of default for each month), in view of past events, current conditions and adjustments to reflect the reasonable and supportable forecast of future economic conditions.
Please refer to Note 17 to our audited consolidated financial statements for additional information regarding the 2028 Notes and the related capped call transactions.
Please refer to Note 17 – Loans payable and other financial liabilities to our audited consolidated financial statements for additional information regarding the 2028 Notes and the related capped call transactions.
Cost of net revenues Cost of net revenues primarily includes cost of goods sold, shipping operation costs (including warehousing costs), carrier and other operating costs, collection fees, sales taxes, funding costs related to our credits business, fraud prevention fees, certain taxes on bank transactions, hosting and site operation fees, compensation for customer support personnel, ISP connectivity charges and depreciation and amortization.
Cost of net revenues Cost of net revenues primarily includes cost of goods sold, shipping operation costs (including warehousing costs), carrier and other operating costs, collection fees, sales taxes, funding costs related to our credits business, fraud prevention expenses, certain taxes on bank transactions, hosting and site operation fees, certain tax withholding related to export duties, compensation for customer support personnel and depreciation and amortization.
See also the “Non-GAAP Measures of Financial Performance” section for details on FX neutral measures. (***) Average inter-annual inflation rate in our Argentine segment for the years ended December 31, 2022, 2021 and 2020 were 70.7%, 48.1% and 42.7%, respectively.
See also the “Non-GAAP Measures of Financial Performance” section for details on FX neutral measures. (3) Average inter-annual inflation rates in our Argentine segment for the years ended December 31, 2022 and 2021 was 70.7% and 48.1%, respectively.
By virtue of this limitation, a Subsidiary Guarantor’s obligation under its Subsidiary Guarantee could be significantly less than amounts payable with respect to the Notes, or a Subsidiary Guarantor may have effectively no obligation under its Subsidiary Guarantee. 62 Table of Contents Under the indenture governing the Notes, the Subsidiary Guarantee of a Subsidiary Guarantor will terminate upon: (i) the sale, exchange, disposition or other transfer (including by way of consolidation or merger) of the Subsidiary Guarantor or the sale or disposition of all or substantially all the assets of the Subsidiary Guarantor (other than to the Company or a Subsidiary) otherwise permitted by the indenture, (ii) satisfaction of the requirements for legal or covenant defeasance or discharge of the Notes, (iii) the release or discharge of the guarantee by such Subsidiary Guarantor of the Triggering Indebtedness (as defined in the applicable indenture) or the repayment of the Triggering Indebtedness, in each case, that resulted in the obligation of such Subsidiary to become a Subsidiary Guarantor, provided that in no event shall the Subsidiary Guarantee of an Initial Subsidiary Guarantor terminate pursuant to this provision, or (iv) such Subsidiary Guarantor becoming an Excluded Subsidiary (as defined in the applicable indenture) or ceasing to be a Subsidiary.
Table of Contents Under the indenture governing the Notes, the Subsidiary Guarantee of a Subsidiary Guarantor will terminate upon: (i) the sale, exchange, disposition or other transfer (including by way of consolidation or merger) of the Subsidiary Guarantor or the sale or disposition of all or substantially all the assets of the Subsidiary Guarantor (other than to the Company or a Subsidiary) otherwise permitted by the indenture, (ii) satisfaction of the requirements for legal or covenant defeasance or discharge of the Notes, (iii) the release or discharge of the guarantee by such Subsidiary Guarantor of the Triggering Indebtedness (as defined in the applicable indenture) or the repayment of the Triggering Indebtedness, in each case, that resulted in the obligation of such Subsidiary to become a Subsidiary Guarantor, provided that in no event shall the Subsidiary Guarantee of an Initial Subsidiary Guarantor terminate pursuant to this provision, or (iv) such Subsidiary Guarantor becoming an Excluded Subsidiary (as defined in the applicable indenture) or ceasing to be a Subsidiary.
Product and technology development expenses Our product and technology development related expenses consist primarily of compensation for our engineering and web-development staff, depreciation and amortization expenses related to product and technology development, certain tax withholding related to export duties, telecommunications costs and payments to third-party suppliers who provide technology maintenance services to us.
Table of Contents Product and technology development expenses Our product and technology development related expenses consist primarily of compensation for our engineering and web-development staff (including long term retention program compensation), depreciation and amortization expenses related to product and technology development, certain tax withholding related to export duties, telecommunications costs and payments to third-party suppliers who provide technology maintenance services to us.
In this sense, as of December 31, 2022, we have committed rental expenditures with our lessors for $929 million and $67 million for operating leases and finance leases, respectively. See Note 23 of our audited consolidated financial statements for further detail on leases.
In this sense, as of December 31, 2023, we have committed rental expenditures with our lessors for $1,180 million and $173 million for operating leases and finance leases, respectively. See Note 23 – Leases of our audited consolidated financial statements for further detail on leases.
(2) Includes charges from transactions with non-guarantor subsidiaries of $641 million for the year ended December 31, 2022. (3) In addition to the charges included in Gross profit, Income from operations includes charges from transactions with non-guarantor subsidiaries of $366 million for the year ended December 31, 2022.
(2) Includes charges from transactions with non-guarantor subsidiaries of $698 million for the year ended December 31, 2023. (3) In addition to the charges included in Gross profit, Income from operations includes charges from transactions with non-guarantor subsidiaries of $828 million for the year ended December 31, 2023.
Please refer to Note 15 of our audited consolidated financial statements for further detail on purchase commitments. 59 Table of Contents Further, in connection with the closing of MELI Kaszek Pioneer Corp (“MEKA”)’s initial public offering on October 1, 2021, MEKA (a special purpose acquisition company sponsored by MELI Kaszek Pioneer Sponsor LLC (the “Sponsor”), which is a joint venture between our subsidiary, MELI Capital Ventures LLC, and Kaszek Ventures Opportunity II, L.P.) entered into a forward purchase agreement with the Sponsor, pursuant to which the Sponsor committed to purchase from MEKA 5 million Class A ordinary shares at a price of $10 per share in a private placement to close substantially concurrently with the consummation of MEKA’s initial business combination.
Further, in connection with the closing of MELI Kaszek Pioneer Corp’s (“MEKA”) initial public offering on October 1, 2021, MEKA (a special purpose acquisition company sponsored by MELI Kaszek Pioneer Sponsor LLC (the “Sponsor”), which is a joint venture between our subsidiary, MELI Capital Ventures LLC, and Kaszek Ventures Opportunity II, L.P.) entered into a forward purchase agreement with the Sponsor, pursuant to which the Sponsor committed to purchase from MEKA 5 million Class A ordinary shares at a price of $10 per share in a private placement to close substantially concurrently with the consummation of MEKA’s initial business combination.
The following table summarizes the composition of our deferred tax assets from loss carryforwards as of December 31, 2022 and 2021: December 31, December 31, Loss carryforwards 2022 in % 2021 in % (in millions, except percentages) (in millions, except percentages) Mexican operations $ 161 63.1 % $ 165 85.4 % Brazilian operations 67 26.3 16 8.5 Argentine operations 15 5.9 6 2.8 Operations in other countries 12 4.7 7 3.3 Total $ 255 100.0 % $ 194 100.0 % We also assess the likelihood that our net deferred tax assets will be realized from future taxable income.
The following table summarizes the composition of our deferred tax assets from loss carryforwards as of December 31, 2023 and 2022: December 31, December 31, Loss carryforwards 2023 in % 2022 in % (In millions, except percentages) (In millions, except percentages) Mexican operations $ 123 69.5 % $ 161 63.1 % Brazilian operations 31 17.5 67 26.3 Argentine operations 10 5.6 15 5.9 Operations in other countries 13 7.4 12 4.7 Total $ 177 100.0 % $ 255 100.0 % We also assess the likelihood that our net deferred tax assets will be realized from future taxable income.
As of December 31, 2022, our main source of liquidity was $3,030 million of cash and cash equivalents and short-term investments, which excludes a $1,219 million investment mainly related to the Central Bank of Brazil Mandatory Guarantee, and consists of cash generated from operations and proceeds from loans.
As of December 31, 2023, our main source of liquidity was $3,747 million of cash and cash equivalents and short-term investments, which excludes $2,289 million investment mainly related to the Central Bank of Brazil Mandatory Guarantee, and consists of cash generated from operations and proceeds from loans.
The following table summarizes the composition of our income taxes for the years ended December 31, 2022, 2021 and 2020: Year Ended December 31, (In millions) 2022 2021 2020 Current: U.S. $ 12 $ — $ — Non U.S. 383 178 152 395 178 152 Deferred: U.S. 55 (3) (5) Non U.S.
The following table summarizes the composition of our income taxes for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, 2023 2022 2021 (In millions) Current: U.S. $ 41 $ 12 $ — Non-U.S. 812 383 178 853 395 178 Deferred: U.S. 36 55 (3) Non-U.S.
On April 8, 2022, we signed a 10-year agreement with Gol Linhas Aereas S.A. under which we committed to contract a minimum amount of air logistics services for a total annual cost of $43 million (total amount once all the dedicated aircraft are in operation).
MEKA was deemed dissolved on January 2, 2024, resulting in the extinguishment of this commitment. On April 8, 2022, we signed a 10-year agreement with Gol Linhas Aereas S.A. under which we committed to contract a minimum amount of air logistics services for a total annual cost of $43 million (total amount once all the dedicated aircraft are in operation).
Also, since 2022, we have used a one month credit conversion factor (“CCF”) estimated according to our terms and conditions, considering the increase in the volume of credit cards portfolio. The loss given default (“LGD”) is the percentage of the exposure at default that is not recoverable. The LGD is estimated using Work-out and Chainladder approaches.
Also, for credit cards, since 2022, the Company has used, as applicable, credit conversion factor (“CCF”) estimated according to terms and conditions, considering the increase in the volume of credit cards portfolio. The loss given default (“LGD”) is the percentage of the exposure at default that is not recoverable. The LGD is estimated using Work-out and Chainladder approaches.
Revenues from advertising services provided to sellers, vendors, brands and others, through performance product ads and display advertising, are recognized based on the number of clicks or impressions. 42 Table of Contents Fintech revenues correspond to our Mercado Pago service, which are attributable to: • commissions representing a percentage of the payment volume processed that are charged to sellers in connection with off Marketplace-platform transactions; • commissions from additional fees we charge when a buyer elects to pay in installments through our Mercado Pago platform, for transactions that occur either on or off our Marketplace platform; • commissions from additional fees we charge when our sellers elect to withdraw cash; • interest, cash advances and fees from merchant and consumer loans granted under our Mercado Credito solution; • commissions that we charge from transactions carried out with Mercado Pago credit and debit cards; and • revenues from the sale of mobile points of sale products and insurtech fees.
Fintech revenues correspond to our Mercado Pago service, which are attributable to: ■ commissions representing a percentage of the payment volume processed that are charged to sellers in connection with off Marketplace-platform transactions; ■ commissions from additional fees we charge when a buyer elects to pay in installments through our Mercado Pago platform, for transactions that occur either on or off our Marketplace platform; ■ interest, cash advances and fees from merchant and consumer loans granted under our Mercado Credito solution; ■ commissions that we charge from transactions carried out with Mercado Pago credit and debit cards; ■ revenues from the sale of mobile points of sale products; ■ revenues from insurtech fees; and ■ commissions from additional fees we charge when our sellers elect to withdraw cash. 39 | MercadoLibre, Inc.
As of December 31, 2022, no amounts had been borrowed under the facility. See Note 17 of our audited consolidated financial statements for further detail.
As of December 31, 2023, no amounts had been borrowed under the facility. See Note 17 – Loans payable and other financial liabilities of our audited consolidated financial statements for further detail.
Deferred Income Tax The following table summarizes the composition of our deferred tax assets as of December 31, 2022 and 2021: December 31, December 31, Deferred tax assets 2022 in % 2021 in % (in millions, except percentages) (in millions, except percentages) Brazilian operations $ 232 30.6 % $ 128 26.5 % Argentine operations 58 7.7 48 9.9 Mexican operations 268 35.4 233 48.4 U.S. deferred tax assets 163 21.5 52 10.9 Operations in other countries 37 4.8 21 4.3 Total $ 758 100.0 % $ 482 100.0 % As of December 31, 2022 and 2021 our deferred tax assets, were comprised mainly of (i) loss carryforwards representing 33.6% and 40.2% of our total deferred tax assets, respectively; (ii) U.S. foreign tax credits representing 20.6% and 10.4% of our total deferred tax assets, respectively; (iii) provisions representing 17.3% and 18.5% of our total deferred tax assets, respectively; and (iv) allowance for doubtful accounts representing 14.5% and 13.6% of our total deferred tax assets, respectively.
Table of Contents Deferred Income Tax The following table summarizes the composition of our deferred tax assets as of December 31, 2023 and 2022: December 31, December 31, Deferred tax assets 2023 in % 2022 in % (In millions, except percentages) (In millions, except percentages) Brazilian operations $ 386 34.6 % $ 232 30.6 % Argentine operations 36 3.2 58 7.7 Mexican operations 335 30.0 268 35.4 U.S. deferred tax assets 308 27.6 163 21.5 Operations in other countries 50 4.6 37 4.8 Total $ 1,115 100.0 % $ 758 100.0 % As of December 31, 2023 and 2022 our deferred tax assets, were comprised mainly of i) allowance for doubtful accounts representing 21.0% and 14.5% of our total deferred tax assets, respectively; (ii) provisions representing 24.7% and 17.3% of our total deferred tax assets, respectively; (iii) U.S. foreign tax credits representing 27.3% and 20.6% of our total deferred tax assets, respectively and (iv) loss carryforwards representing 15.9% and 33.6% of our total deferred tax assets, respectively.
Fintech revenues grew 134.7%, a $334 million increase, during the year ended December 31, 2022 as compared to 2021, mainly driven by an increase of $258 million in our credits revenues and an increase of $72 million in our revenues from fintech services.
Fintech revenues grew 72.9%, a $424 million increase, during the year ended December 31, 2023 as compared to 2022, mainly driven by an increase of $278 million in our credits revenues and an increase of $144 million in our revenues from fintech services.
Summarized balance sheet information for the Obligor Group as of December 31, 2022 and 2021 is provided in the table below: December 31, (In millions) 2022 2021 Current assets (1) (2) $ 7,966 $ 6,193 Non-current assets (3) 2,693 1,770 Current Liabilities (4) 7,214 4,938 Non-current Liabilities (5) 2,547 2,012 (1) Includes restricted cash and cash equivalents of $687 million and $761 million and foreign government debt securities (Central Bank of Brazil mandatory guarantee) of $1,219 million and $602 million as of December 31, 2022 and December 31, 2021, respectively.
Summarized balance sheet information for the Obligor Group as of December 31, 2023 and 2022 is provided in the table below: December 31, 2023 2022 (In millions) Current assets (1) (2) $ 11,343 $ 7,966 Non-current assets (3) 3,032 2,693 Current Liabilities (4) 9,683 7,214 Non-current Liabilities 2,327 2,547 (1) Includes restricted cash and cash equivalents of $430 million and $687 million and foreign government debt securities (Central Bank of Brazil mandatory guarantee) of $2,289 million and $1,219 million as of December 31, 2023 and December 31, 2022, respectively.
(2) Includes Current assets from non-guarantor subsidiaries of $863 million and $287 million as of December 31, 2022 and December 31, 2021, respectively. (3) Includes Non-current assets from non-guarantor subsidiaries of $410 million and $204 million as of December 31, 2022 and December 31, 2021, respectively.
(2) Includes Current assets from non-guarantor subsidiaries of $1,405 million and $863 million as of December 31, 2023 and December 31, 2022, respectively. (3) Includes Non-current assets from non-guarantor subsidiaries of $309 million and $410 million as of December 31, 2023 and December 31, 2022, respectively.
The discussion and analysis of our financial condition and results of operations has been organized to present the following: • a brief overview of our company; • a review of our financial presentation and accounting policies, including our critical accounting policies and estimates; • a discussion of our principal trends and results of operations for the years ended December 31, 2022, 2021 and 2020; • a discussion of the principal factors that influence our results of operations, financial condition and liquidity; • a discussion of our liquidity and capital resources and a discussion of our capital expenditures; and 39 Table of Contents • a discussion of the market risks that we face.
The discussion and analysis of our financial condition and results of operations has been organized to present the following: ■ a brief overview of our company; ■ a review of our financial presentation and accounting policies, including our critical accounting policies and estimates; ■ a discussion of our principal trends and results of operations for the years ended December 31, 2023, 2022 and 2021; ■ a discussion of the principal factors that influence our results of operations, financial condition and liquidity; ■ a discussion of our liquidity and capital resources and a discussion of our capital expenditures; ■ a description of our key performance indicators; and ■ a description of our non-GAAP financial measures.
As of December 31, 2022 and 2021, our valuation allowance amounted to $360 million and $262 million, respectively. 56 Table of Contents The following table summarizes the composition of our valuation allowance as of December 31, 2022 and 2021: December 31, December 31, Valuation Allowance 2022 in % 2021 in % (in millions, except percentages) (in millions, except percentages) Mexican operations $ 180 50.0 % $ 197 75.2 % U.S. foreign tax credits and deferred tax assets 161 44.7 52 19.7 Argentine operations 6 1.7 3 1.0 Operations in other countries 13 3.6 10 4.1 Total $ 360 100.0 % $ 262 100.0 % Our valuation allowance is based on our assessment that it is more likely than not that the deferred tax asset will not be realized.
The following table summarizes the composition of our valuation allowance as of December 31, 2023 and 2022: December 31, December 31, Valuation Allowance 2023 in % 2022 in % (In millions, except percentages) (In millions, except percentages) U.S. deferred tax assets $ 304 81.3 % $ 161 44.7 % Mexican operations 53 14.2 180 50.0 Argentine operations 7 1.9 6 1.7 Operations in other countries 10 2.6 13 3.6 Total $ 374 100.0 % $ 360 100.0 % Our valuation allowance is based on our assessment that it is more likely than not that the deferred tax asset will not be realized.
Our advertising platform enables merchants and brands to access the millions of consumers that are on our Marketplaces at any given time with the intent to purchase, which increases the likelihood of conversion.
Our advertising platform enables merchants and brands to access the millions of consumers that are on our Marketplaces at any given time with the intent to purchase, which increases the likelihood of conversion. Advertisers are able to leverage our first-party data to create and target highly particularized audiences.
Mexico Commerce revenues in Mexico increased 38.7% in the year ended December 31, 2022, as compared to 2021. This increase was generated by an increase of $280 million in our commerce services revenues and an increase of $78 million in our revenues from commerce products sales for the year ended December 31, 2022.
Mexico Commerce revenues in Mexico increased 54.4% in the year ended December 31, 2023, as compared to 2022. This increase was generated by an increase of $617 million in our commerce services revenues and an increase of $80 million in our revenues from commerce products sales.
Capital expenditures Our capital expenditures (comprised of our payments for property and equipment (such as fulfillment centers), intangible assets (excluding digital assets) and business acquisitions for the years ended December 31, 2022 and 2021 amounted to $455 million and $630 million, respectively.
Capital expenditures Our capital expenditures (comprised of our investments in property and equipment (such as certain assets used in our fulfillment centers) and intangible assets (excluding digital assets) for the years ended December 31, 2023 and 2022 amounted to $509 million and $455 million, respectively.
General and administrative expenses Our general and administrative expenses consist primarily of salaries for management and administrative staff, compensation of non-employee directors, long term retention program compensation, expenses for legal, audit and other professional services, insurance expenses, office space rental expenses, impairment losses from digital assets, travel and business expenses, as well as depreciation and amortization expenses.
General and administrative expenses Our general and administrative expenses consist primarily of salaries for management and administrative staff, compensation of non-employee directors, long term retention program compensation, expenses for legal, audit and other professional services, insurance expenses, office space rental expenses, changes in the fair value (for the year ended December 31, 2023) and impairment (for the years ended December 31, 2022 and 2021) of digital assets, travel and business expenses, as well as depreciation and amortization expenses.
This increase was generated by an increase of $1,014 million in our commerce services revenues and an increase of $159 million in our revenues from commerce products sales for the year ended December 31, 2022, as compared to 2021.
Brazil Commerce revenues in Brazil increased 46.9% in the year ended December 31, 2023 as compared to 2022. This increase was generated by an increase of $1,070 million in our commerce services revenues and an increase of $370 million in our revenues from commerce products sales.
This cost structure is directly affected by the level of operations of our services, and our strategic plan on gross profit is built on factors such as an ample liquidity to fund expenses and investments and a cost-effective capital structure.
Our cost structure is directly affected by the level of operations of our services, and our strategic plan on gross profit is built on factors such as an ample liquidity to fund expenses and investments and a cost-effective capital structure. For the years ended December 31, 2023 and 2022, our gross profit margins were 49.8% and 49.0%, respectively.
Facilitating credit is a key service overlay that enables us to further strengthen the engagement and lock-in rate of our users, while also generating additional touchpoints and incentives to use Mercado Pago as an end-to-end financial solution. Our asset management product, which is available in Argentina, Brazil and Mexico, is a critical pillar to build our alternative two-sided network vision.
Facilitating credit is a key service overlay that enables us to further strengthen the engagement and lock-in rate of our users, while also generating additional touchpoints and incentives to use Mercado Pago as an end-to-end financial solution.
Fintech revenues grew 109.6%, a $740 million increase, during the year ended December 31, 2022 as compared to 2021, mainly driven by an increase of $328 million in our credits revenues and an increase of $414 million in our revenues from fintech services.
Fintech revenues grew by 18.9%, a $489 million increase, during the year ended December 31, 2023 as compared to 2022, mainly driven by an increase of $446 million in our revenues from fintech services and an increase of $53 million in our credits revenues.
Summarized statement of income information for the Obligor Group for the year ended December 31, 2022 is provided in the table below: Year Ended December 31, (In millions) 2022 Net Revenues (1) $ 8,541 Gross Profit (2) 3,643 Income from operations (3) 797 Net income (4) 366 (1) Includes Net revenues from transactions with non-guarantor subsidiaries of $145 million for the year ended December 31, 2022.
Table of Contents Summarized statement of income information for the Obligor Group for the year ended December 31, 2023 is provided in the table below: Year Ended December 31, 2023 (In millions) Net Revenues (1) $ 11,978 Gross Profit (2) 5,503 Income from operations (3) 1,172 Net income (4) 506 (1) Includes Net revenues from transactions with non-guarantor subsidiaries of $64 million for the year ended December 31, 2023.
These estimates are based on our assessment of the facts and circumstances and historical information related to actions filed against the Company at each balance sheet date and are subject to change based upon new information and future events. From time to time, we are involved in disputes that arise in the ordinary course of business.
These estimates are based on our assessment of the facts and circumstances and historical information related to actions filed against the Company at each balance sheet date and are subject to change based upon new information and future events. 38 | MercadoLibre, Inc.
Fintech revenues grew by 81.5%, a $1,165 million increase, during the year ended December 31, 2022 as compared to 2021, mainly driven by an increase of $634 million in our credits revenues and an increase of $526 million in our revenues from fintech services.
Fintech revenues grew 39.9%, a $564 million increase, during the year ended December 31, 2023 as compared to 2022, mainly driven by an increase of $388 million in our revenues from fintech services and an increase of $178 million in our credits revenues.
We provide this non-GAAP financial measure to enhance overall understanding of our current financial performance and its prospects for the future. We believe that FX neutral measures provide useful information to both Management and investors by excluding the foreign currency exchange rate impact that may not be indicative of our core operating results and business outlook.
Table of Contents FX neutral We believe that FX neutral measures provide useful information to both Management and investors by excluding the foreign currency exchange rate impact that may not be indicative of our core operating results and business outlook.
Year Ended December 31, (*) (in millions) 2022 2021 2020 Other data: Unique Active Users (1) 148 140 133 Gross merchandise volume (2) 34,449 28,351 20,927 Number of successful items sold (3) 1,147 1,014 719 Number of successful items shipped (4) 1,105 962 649 Total payment volume (5) 123,633 77,371 49,757 Total volume of payments on marketplace (6) 36,281 29,078 21,439 Total payment transactions (7) 5,470 3,255 1,915 Capital expenditures $ 455 $ 630 $ 254 Depreciation and amortization $ 403 $ 204 $ 105 (*) Figures have been calculated using rounded amounts.
Year Ended December 31, (1) 2023 2022 2021 (In millions, except percentages) Unique Active Users (2) 218 148 140 Gross merchandise volume (3) $ 44,749 $ 34,449 $ 28,351 Number of items sold (4) 1,404 1,147 1,014 Number of items shipped (5) 1,377 1,105 962 Total payment volume (6) $ 182,821 $ 123,633 $ 77,371 Total volume of payments on marketplace (7) $ 47,182 $ 36,281 $ 29,078 Total payment transactions (8) 9,470 5,470 3,255 NIMAL (9) 36.2 % 32.0 % 36.5 % Capital expenditures $ 509 $ 455 $ 630 Depreciation and amortization $ 524 $ 403 $ 204 (1) Figures have been calculated using rounded amounts.
As of December 31, 2022, we offer our shipping solution directed towards deliveries in Argentina, Brazil, Mexico, Chile, Colombia, Uruguay, Peru and Ecuador and we also offer free shipping to buyers in Argentina, Brazil, Mexico, Chile, Colombia, Uruguay and Peru. 40 Table of Contents Mercado Credito, our credit solution available in Argentina, Brazil, Mexico and Chile, leverages our user base, which is loyal and engaged, and in part has also been historically underserved or overlooked by financial institutions and suffers from a lack of access to needed credit.
Mercado Credito, our credit solution available in Argentina, Brazil, Mexico and Chile, leverages our user base, which is loyal and engaged, and in part has also been historically underserved or overlooked by financial institutions and suffers from a lack of access to needed credit.
To the extent we believe that it is more likely than not that some portion or the total deferred tax assets will not be realized, we establish a valuation allowance.
To the extent we believe that it is more likely than not that some portion or the total deferred tax assets will not be realized, we establish a valuation allowance. As of December 31, 2023 and 2022, our valuation allowance amounted to $374 million and $360 million, respectively.
(4) Includes Current liabilities to non-guarantor subsidiaries of $1,334 million and $726 million as of December 31, 2022 and December 31, 2021, respectively. (5) Includes Non-current liabilities to non-guarantor subsidiaries of $135 million as of December 31, 2021.
(4) Includes Current liabilities to non-guarantor subsidiaries of $1,808 million and $1,334 million as of December 31, 2023 and December 31, 2022, respectively. 53 | MercadoLibre, Inc.
Refer to Notes 17 and 21 of our audited consolidated financial statements for further detail.
Refer to Note 17 – Loans payable and other financial liabilities and Note 21 – Securitization transactions of our audited consolidated financial statements for further detail.
Argentina Commerce revenues in Argentina increased 26.8% in the year ended December 31, 2022 as compared to 2021. This increase was generated by an increase of $200 million in our commerce services revenues and an increase of $29 million in our revenues from commerce products sales for the year ended December 31, 2022.
Argentina Commerce revenues in Argentina increased 16.2% in the year ended December 31, 2023 as compared to 2022. This increase was generated by an increase of $222 million in our commerce services revenues, partially offset by a decrease of $46 million in our revenues from commerce products sales.
In terms of liquidity and cash management, our relevant sources of funding remain available and credit facilities have been obtained at the geographic segment level. 60 Table of Contents The following table presents our cash flows from operating activities, investing activities and financing activities for the years ended December 31, 2022, 2021 and 2020: Years ended December 31, (In millions) 2022 2021 2020 Net cash provided by (used in): Operating activities $ 2,940 $ 965 $ 1,182 Investing activities (3,871) (1,597) (252) Financing activities 916 1,925 242 Effect of exchange rates on cash and cash equivalents, restricted cash and cash equivalents (270) (153) (115) Net (decrease) increase in cash, cash equivalents, restricted cash and cash equivalents $ (285) $ 1,140 $ 1,057 Net cash provided by operating activities Cash provided by operating activities consists of net income (loss) adjusted for certain non-cash items, and the effect of changes in working capital and other activities: Years ended December 31, Change from 2021 to 2022 2022 2021 in Dollars in % (in millions, except percentages) Net Cash provided by: Operating activities $ 2,940 $ 965 $ 1,975 204.7 % Net cash provided by operating activities during the year ended December 31, 2022, resulted primarily from our net income of $482 million, adjustments to net income related to non-cash items of $1,924 million, an increase in funds payable to customers by $1,044 million, a $449 million increase in payables and accrued expenses, which were partially offset by a $1,084 million increase in credit card receivables and other means of payments.
The following table presents our cash flows from operating activities, investing activities and financing activities for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, 2023 2022 2021 (In millions) Net cash provided by (used in): Operating activities $ 5,140 $ 2,940 $ 965 Investing activities (3,450) (3,871) (1,597) Financing activities (267) 916 1,925 Effect of exchange rates on cash and cash equivalents, restricted cash and cash equivalents (938) (270) (153) Net increase (decrease) in cash, cash equivalents, restricted cash and cash equivalents $ 485 $ (285) $ 1,140 Net cash provided by operating activities Cash provided by operating activities consists of net income adjusted for certain non-cash items, and the effect of changes in working capital and other activities: Year Ended December 31, Change from 2022 to 2023 2023 2022 in Dollars in % (In millions, except percentages) Net Cash provided by: Operating activities $ 5,140 $ 2,940 $ 2,200 74.8 % Net cash provided by operating activities during the year ended December 31, 2023, resulted primarily from our net income of $987 million, adjustments to net income related to non-cash items of $2,103 million, a $1,502 million increase in funds payable to customers, an increase of $1,225 million in payables and accrued expenses and an increase of $693 million in amounts payable due to credit and debit card transactions, which were partially offset by a $1,321 million increase in credit card receivables and other means of payments.
The following table sets forth our total net revenues and the sequential quarterly growth of these net revenues for the periods described below: Quarter Ended March 31, June 30, September 30, December 31, (in millions, except percentages) 2022 Net revenues $ 2,248 $ 2,597 $ 2,690 $ 3,002 Percent change from prior quarter 5% 16% 4% 12% 2021 Net revenues $ 1,378 $ 1,703 $ 1,858 $ 2,130 Percent change from prior quarter 4% 24% 9% 15% 2020 Net revenues $ 652 $ 878 $ 1,116 $ 1,328 Percent change from prior quarter (3%) 35% 27% 19% 52 Table of Contents The following table sets forth the growth in net revenues in local currencies, for the years ended December 31, 2022 and 2021 as compared to the same periods in 2021 and 2020, respectively: Changes from (% of revenue growth in Local Currency) 2021 to 2022 (*) 2020 to 2021 (**) Brazil 38.7 % 84.5 % Argentina (***) 126.3 % 106.3 % Mexico 57.1 % 93.6 % Other Countries 23.2 % 102.4 % Total Consolidated 59.7 % 93.9 % (*) The local currency revenue growth was calculated by using the average monthly exchange rates for each month during 2021 and applying them to the corresponding months in 2022, so as to calculate what our financial results would have been had exchange rates remained stable from one year to the next.
Table of Contents The following table sets forth the growth in net revenues in local currencies, for the years ended December 31, 2023 and 2022 as compared to the same periods in 2022 and 2021, respectively: Changes from (% of revenue growth in Local Currency) 2022 to 2023 (1) 2021 to 2022 (2) Brazil 29.4 % 38.7 % Argentina (3) 184.2 126.3 Mexico 40.8 57.1 Other countries 24.9 23.2 Total consolidated 67.9 % 59.7 % (1) The local currency revenue growth was calculated by using the average monthly exchange rates for each month during 2022 and applying them to the corresponding months in 2023, so as to calculate what our financial results would have been had exchange rates remained stable from one year to the next.
Consequently, total volume of payment on marketplace for the years ended December 31, 2021 and 2020 have been recast to include shipping and financing fees.
Consequently, total volume of payment on marketplace for the year ended December 31, 2021 has been recast to include shipping and financing fees. (8) Number of all transactions paid for using Mercado Pago.
Our digital payments solution enables any MercadoLibre registered user to securely and easily send and receive digital payments and to pay for purchases made on any of Mercado Libre’s Marketplaces.
Our digital payments solution enables any MercadoLibre registered user to securely and easily send and receive digital payments and to pay for purchases made on any of Mercado Libre’s Marketplaces. Currently, Mercado Pago processes and settles all transactions on our Marketplaces in Argentina, Brazil, Mexico, Chile, Colombia, Uruguay, Peru and Ecuador.
It incentivizes our users to begin to fund their digital wallets with cash as opposed to credit or debit cards given that the return our product offers is greater than traditional checking accounts.
Our asset management product, which is available in Argentina, Brazil, Mexico and Chile, is a critical pillar to build our alternative two-sided network vision. It incentivizes our users to begin to fund their digital wallets with cash as opposed to credit or debit cards given that the return our product offers is greater than traditional checking accounts.
General and administrative For year ended December 31, Change from 2021 to 2022 For year ended December 31, Change from 2020 to 2021 2022 2021 in Dollars in % 2021 2020 in Dollars in % (in millions, except percentages) (in millions, except percentages) General and administrative $ 661 $ 465 $ 196 42.2% $ 465 $ 327 $ 138 42.3% As a percentage of net revenues 6.3% 6.6% 6.6 % 8.2 % For the year ended December 31, 2022, the increase in general and administrative expenses as compared to the year ended December 31, 2021 was primarily attributable to: i) a $79 million increase in salaries and wages, mainly related to our Argentine segment where the average annual inflation rate during 2022 was higher than the local currency depreciation (See also "Item 1A.
The following table presents general and administrative expenses for the years indicated: Year Ended December 31, Change from 2022 to 2023 Year Ended December 31, Change from 2021 to 2022 2023 2022 in Dollars in % 2022 2021 in Dollars in % (In millions, except percentages) (In millions, except percentages) General and administrative $ 766 $ 661 $ 105 15.9% $ 661 $ 465 $ 196 42.2% As a percentage of net revenues 5.3% 6.3% 6.3% 6.6% For the year ended December 31, 2023, the increase in general and administrative expenses as compared to the year ended December 31, 2022 was primarily attributable to a $111 million increase in salaries and wages, mainly related to the increase in amounts accrued under the LTRPs as a consequence of the increase in our common stock price, and in the Argentine segment, as a consequence of higher average monthly inflation rate than the average monthly local currency devaluation.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe following table shows a sensitivity analysis of the risk associated with our total contractual obligation fair value related to the outstanding LTRP Variable Award Payment subject to equity price risk if our common stock price per share were to increase or decrease by up to 40%: As of December 31, 2022 MercadoLibre, Inc Equity Price 2018, 2019, 2020, 2021 and 2022 LTRP Variable contractual obligation (In millions, except equity price) Change in equity price in percentage 40 % 1,190.66 220 30 % 1,105.61 204 20 % 1,020.56 188 10 % 935.52 172 Static (*) 850.47 157 -10 % 765.42 141 -20 % 680.38 125 -30 % 595.33 110 -40 % 510.28 94 (*) Present value of average closing stock price for the last 60 trading days of the year preceding the applicable payment date.
Biggest changeThe following table shows a sensitivity analysis of the risk associated with our total contractual obligation fair value related to the outstanding LTRP Variable Award Payment subject to equity price risk if our common stock price per share were to increase or decrease by up to 40%: 61 | MercadoLibre, Inc.
In order to receive the full target award under the 2019, 2020, 2021 and/or 2022 LTRPs, each eligible employee must remain employed as of each applicable payment date.
In order to receive the full target award under the 2019, 2020, 2021, 2022 and/or 2023 LTRPs, each eligible employee must remain employed as of each applicable payment date.
The 2019, 2020, 2021 and 2022 LTRP awards are payable as follows: • the eligible employee will receive 16.66% of half of his or her target 2019, 2020, 2021 and/or 2022 LTRP bonus once a year for a period of six years, with the first payment occurring no later than April 30, 2020 and 2021, and no later than January 31, 2022 and 2023, respectively (the “2019, 2020, 2021 or 2022 Annual Fixed Payment”, respectively); and • on each date we pay the respective Annual Fixed Payment to an eligible employee, he or she will also receive a payment (the “2019, 2020, 2021 or 2022 Variable Payment”) equal to the product of (i) 16.66% of half of the target 2019, 2020, 2021 or 2022 LTRP award and (ii) the quotient of (a) divided by (b), where (a), the numerator, equals the Applicable Year Stock Price (as defined below) and (b), the denominator, equals the average closing price of our common stock on the NASDAQ Global Select Market during the final 60 trading days of 2018, 2019, 2020 and 2021 defined as $322.91, $553.45, $1,431.26 and $1,391.81 for the 2019, 2020, 2021 and 2022 LTRPs, respectively.
The 2019, 2020, 2021, 2022 and 2023 LTRP awards are payable as follows: ■ the eligible employee will receive 16.66% of half of his or her target 2019, 2020, 2021, 2022 and/or 2023 LTRP bonus once a year for a period of six years, with the first payment occurring no later than April 30, 2020, 2021, 2022, 2023 and 2024, respectively (the “2019, 2020, 2021, 2022 or 2023 Annual Fixed Payment”, respectively); and ■ on each date we pay the respective Annual Fixed Payment to an eligible employee, he or she will also receive a payment (the “2019, 2020, 2021, 2022 or 2023 Variable Payment”) equal to the product of (i) 16.66% of half of the target 2019, 2020, 2021, 2022 or 2023 LTRP award and (ii) the quotient of (a) divided by (b), where (a), the numerator, equals the Applicable Year Stock Price (as defined below) and (b), the denominator, equals the average closing price of our common stock on the NASDAQ Global Select Market during the final 60 trading days of 2018, 2019, 2020, 2021 and 2022 defined as $322.91, $553.45, $1,431.26, $1,391.81 and $888.69 for the 2019, 2020, 2021, 2022 and 2023 LTRPs, respectively.
Dollar. (2) Depreciation of the subsidiaries local currency against U.S. Dollar. (*) Includes cost of net revenues and operating expenses. The table above shows an increase in our net income when the U.S. dollar weakens against foreign currencies because of the positive impact of the increase in income from operations.
Dollar. (2) Decrease of the subsidiaries local currency against U.S. Dollar. (3) Includes cost of net revenues and operating expenses. The table above shows an increase in our net income when the U.S. dollar weakens against foreign currencies because of the positive impact of the increase in income from operations.
In November 2021, we acquired Kangú Participações S.A. Former Kangú’s shareholders who after the acquisition became the Company’s employees will receive cash payments annually over a three-year period subject to certain performance and stay conditions. The payments will be indexed based on changes in equity price of our Common Stock.
In November 2021, we acquired Kangu Participações S.A. Former Kangu’s shareholders who after the acquisition became the Company’s employees will receive cash payments annually over a three-year period subject to certain performance and stay conditions. The payments will be indexed based on changes in equity price of our Common Stock.
Additionally, we would have recorded a foreign currency loss amounting to approximately $31 million in our Brazilian subsidiaries. 66 Table of Contents Argentine Segment In accordance with U.S. GAAP, we have classified our Argentine operations as highly inflationary since July 1, 2018, using the U.S. dollar as the functional currency for purposes of reporting our financial statements.
Additionally, we would have recorded a foreign currency loss amounting to approximately $49 million in our Brazilian subsidiaries. Argentine segment In accordance with U.S. GAAP, we have classified our Argentine operations as highly inflationary since July 1, 2018, using the U.S. dollar as the functional currency for purposes of reporting our financial statements.
Therefore, no translation effect has been accounted for in other comprehensive income related to our Argentine operations since July 1, 2018. Argentina’s annual inflation rate for the years ended December 31, 2022, 2021 and 2020 was 94.8%, 50.9% and 36.1%, respectively.
Therefore, no translation effect has been accounted for in other comprehensive income related to our Argentine operations since July 1, 2018. Argentina’s annual inflation rate for the years ended December 31, 2023, 2022 and 2021 was 211.4%, 94.8% and 50.9%, respectively.
Our board of directors, upon the recommendation of the compensation committee, approved the 2019, 2020, 2021 and 2022 Long Term Retention Program (the “2019, 2020, 2021 and 2022 LTRPs”), respectively, under which certain eligible employees have the opportunity to receive cash payments annually for a period of six years (with the first payment occurring no later than April 30, 2020 and 2021 for the 2019 and 2020 LTRPs, respectively, and no later than January 31, 2022 and 2023 for the 2021 and 2022 LTRPs, respectively).
Equity price risk Our board of directors, upon the recommendation of the compensation committee, approved the 2019, 2020, 2021, 2022 and 2023 Long Term Retention Programs (the “2019, 2020, 2021, 2022 and 2023 LTRPs”), respectively, under which certain eligible employees have the opportunity to receive cash payments annually for a period of six years (with the first payment occurring no later than April 30, 2020, 2021, 2022, 2023 and 2024 for the 2019, 2020, 2021, 2022 and 2023 LTRPs, respectively).
These market risks arise mainly from the possibility that changes in interest rates and the U.S. dollar exchange rate with local currencies, particularly the Brazilian Real, Argentine Peso and Mexican Peso due to those segments’ respective share of our revenues and assets, may affect the value of our financial assets and liabilities.
These market risks arise mainly from macroeconomic instability and the possibility that changes in interest rates and the U.S. dollar exchange rate with local currencies, particularly the Brazilian Real, Argentine Peso and Mexican Peso due to Brazil’s, Argentina’s and Mexico’s respective share of our revenues, may affect the value of our financial assets and liabilities.
Brazilian Segment Considering a hypothetical devaluation of 10% of the Brazilian Real against the U.S. dollar on December 31, 2022, the reported net assets in our Brazilian subsidiaries would have decreased by approximately $178 million with the related impact in Other Comprehensive Income.
Brazilian segment Considering a hypothetical decrease of 10% of the Brazilian Real against the U.S. dollar on December 31, 2023, the reported net assets in our Brazilian subsidiaries would have decreased by approximately $244 million with the related impact in Other Comprehensive Income.
Mexican Segment Considering a hypothetical devaluation of 10% of the Mexican peso against the U.S. dollar on December 31, 2022, the reported net assets in our Mexican subsidiaries would have decreased by approximately $60 million with the related impact in Other Comprehensive Income.
Mexican segment Considering a hypothetical decrease of 10% of the Mexican peso against the U.S. dollar on December 31, 2023, the reported net assets in our Mexican subsidiaries would have decreased by approximately $103 million with the related impact in Other Comprehensive Income.
Fixed rate securities may have their fair value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than predicted if interest rates fall. As of December 31, 2022, our short-term investments amounted to $2,339 million and our long-term investments amounted to $322 million.
Fixed rate securities may have their fair value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than predicted if interest rates fall. As of December 31, 2023, our short-term investments amounted to $3,480 million and our long-term investments amounted to $162 million.
As of December 31, 2022, the total contractual obligation fair value of the mentioned payments amounted to $6.6 million.
As of December 31, 2023, the total contractual obligation fair value of the mentioned payments amounted to $10 million.
We designate these contracts as cash flow or net investment hedges for accounting purposes. The derivative’s gain or loss is initially reported as a component of accumulated other comprehensive income (“AOCI”).
We designate these contracts as cash flow, net investment and fair value hedges for accounting purposes. The derivatives’ gain or loss for cash flow and net investment hedges is initially reported as a component of accumulated other comprehensive loss.
As of December 31, 2022, we had $90 million long-term investments denominated in foreign currencies.
As of December 31, 2023, we had $79 million long-term investments denominated in foreign currencies.
Additionally, we would have recorded a foreign currency loss amounting to approximately $20 million in our Mexican subsidiaries. Interest Our earnings and cash flows are also affected by changes in interest rates.
Additionally, we would have recorded a foreign currency loss amounting to approximately $23 million in our Mexican subsidiaries. 60 | MercadoLibre, Inc. Table of Contents Interest Our earnings and cash flows are also affected by changes in interest rates.
Our short-term investments, except for the $1,219 million related to the Central Bank of Brazil mandatory guarantee, can be readily converted at any time into cash or into securities with a shorter remaining time to maturity. We determine the appropriate classification of our investments at the time of purchase and re-evaluate such designations as of each balance sheet date.
Our short-term investments can be readily converted at any time into cash or into securities with a shorter remaining time to maturity. We determine the appropriate classification of our investments at the time of purchase and re-evaluate such designations as of each balance sheet date.
As of December 31, 2022, the accrued liability related to the outstanding Variable Award Payment of the LTRP included in Salaries and social security payable and Non-current other liabilities in our consolidated balance sheet amounted to $58 million.
As of December 31, 2023, the accrued liability related to the outstanding Variable Award Payment of the LTRP included in Salaries and social security payable in our consolidated balance sheet amounted to $104 million.
As of December 31, 2022, our U.S. dollar-denominated cash and cash equivalents, restricted cash and cash equivalents and short-term investments totaled $1,073 million and our U.S. dollar-denominated long-term investments totaled $232 million.
As of December 31, 2023, our U.S. dollar-denominated cash and cash equivalents, restricted cash and cash equivalents and short-term investments totaled $1,661 million and our U.S. dollar-denominated long-term investments totaled $83 million.
Considering a hypothetical devaluation of 10% of the Argentine Peso against the U.S. dollar on December 31, 2022, the effect on non-functional currency net asset position in our Argentine subsidiaries would have been a foreign exchange loss amounting to approximately $16 million in our Argentine subsidiaries.
Considering a hypothetical decrease of 10% of the Argentine Peso against the U.S. dollar on December 31, 2023, the effect on non-functional currency net liability position in our Argentine subsidiaries would have been a foreign exchange gain amounting to approximately $4 million in our Argentine subsidiaries.
Fluctuations of the interest rate could also have a negative impact on interest expense related to our Loans payable and other financial liabilities, as a portion of these instruments is subject to variable interest rates. As of December 31, 2022, our loans payable and other financial liabilities which accrue interest based on variable rates amounted to $2,615 million.
Fluctuations of the interest rate could also have a negative impact on interest expense related to our Loans payable and other financial liabilities, as a portion of these instruments is subject to variable interest rates.
These changes could have an impact on the interest rates that financial institutions charge us prior to the time we sell our credit card receivables and on the financial debt that we use to fund our Mercado Pago and Mercado Credito’s operations.
These changes could have an impact on the interest rates that financial institutions charge us prior to the time we sell our Mercado Pago receivables and on the financial debt that we use to fund Mercado Pago and Mercado Credito’s operations. As of December 31, 2023, Mercado Pago’s receivables totaled $3,632 million.
See Notes 17 and 21 of our audited consolidated financial statements for further detail. We have entered into swap contracts to hedge the interest rate fluctuation of $842 million notional amount, $362 million of which have been designated as hedging instruments.
We have entered into swap contracts to hedge the interest rate fluctuation of $489 million notional amount, $244 million of which have been designated as hedging instruments. See Note 24 – Derivative instruments of our audited consolidated financial statements for further detail on derivatives instruments.
We use the Argentina’s official exchange rate to account for transactions in our Argentine segment, which as of December 31, 2022, 2021 and 2020 was 177.16, 102.72 and 84.15, respectively, against the U.S. dollar.
We use Argentina’s official exchange rate to account for transactions in our Argentine segment, which as of December 31, 2023, 2022 and 2021 was 808.45, 177.16 and 102.72, respectively, against the U.S. dollar. For the years ended December 31, 2023, 2022 and 2021, Argentina’s official exchange rate against the U.S. dollar increased 356.3%, 72.5% and 22.1%, respectively.
As of December 31, 2022, the total cash and cash equivalents, restricted cash and cash equivalents denominated in foreign currencies totaled $3,138 million, short-term investments denominated in foreign currencies totaled $1,491 million and accounts receivable, credit card receivables and other means of payments and loans receivable in foreign currencies totaled $4,812 million.
As of December 31, 2023, the total cash and cash equivalents, restricted cash and cash equivalent denominated in foreign currencies totaled $3,201 million, short-term investments denominated in foreign currencies totaled $2,466 million and accounts receivable, credit card receivables and other means of payments and loans receivable in foreign currencies totaled $6,482 million.
These market risks arise from our obligations to pay employees cash in amounts that vary based on the market price of our stock.
We are also exposed to market risks arising from our long-term retention programs (“LTRPs”). These market risks arise from our obligations to pay employees cash payments in amounts that vary based on the market price of our stock.
As of December 31, 2022, Mercado Pago’s funds receivable from credit cards and other means of payments totaled $2,946 million. Interest rate fluctuations could also impact interest earned through our Mercado Credito solution. As of December 31, 2022, loans receivable net of the allowance for doubtful accounts under our Mercado Credito solution totaled $1,736 million.
Interest rate fluctuations could also impact interest earned through our Mercado Credito solution. As of December 31, 2023, loans receivable net of the allowance for doubtful accounts from our Mercado Credito solution totaled $2,694 million.
For the year ended December 31, 2022, we had a consolidated loss on foreign currency of $198 million mainly related to higher foreign exchange losses attributable to the acquisition of our own common stock in the Argentine market at a price that reflects the additional cost of accessing U.S dollars through U.S. dollar denominated securities due to restrictions imposed by the Argentine government for buying U.S. dollars at the official exchange rate (refer to Note 25 of our audited consolidated financial statements for further detail and see also “Item 1A.
For the year ended December 31, 2023, we had a consolidated loss on foreign currency of $615 million mainly related to higher foreign exchange losses attributable to our own common stock acquisition in the Argentine market at a price that reflects the additional cost of accessing U.S. dollars through an indirect mechanism due to restrictions imposed by the Argentine government for buying U.S. dollars at the official exchange rate, and higher foreign exchange losses from our Argentinian subsidiaries due to the devaluation of the Argentine peso during December 2023 and the acquisition of U.S. dollars in the Argentine market at a price that reflects the additional cost of accessing U.S. dollars through an indirect mechanism due to restrictions imposed by the Argentine government for buying U.S. dollars at the official exchange rate. 59 | MercadoLibre, Inc.
Our subsidiaries generate revenues and incur most of their expenses in the respective local currencies of the countries in which they operate. As a result, our subsidiaries use their local currency as their functional currency except for our Argentine subsidiaries, whose functional currency is the U.S. dollar due to the inflationary environment.
As a result, our subsidiaries use their local currency as their functional currency except for our Argentine subsidiaries, whose functional currency is the U.S. dollar due to the inflationary environment.
Cash flow hedges and net investment hedges are subsequently reclassified into the financial statement line item in which the hedged item is recorded in the same period the forecasted transaction affects earnings. 65 Table of Contents As of December 31, 2022, we hold cash and cash equivalents in local currencies in our subsidiaries, and have receivables denominated in local currencies in all of our operations.
Cash flow hedges and net investment hedges are subsequently reclassified into the financial statement line item in which the hedged item is recorded in the same period the forecasted transaction affects earnings.
Foreign Currency Sensitivity Analysis The table below shows the impact on our net revenues, cost of net revenues, operating expenses, other income (expenses) and income tax, net income and equity for a positive and a negative 10% fluctuation on all the foreign currencies to which we are exposed to as of December 31, 2022 and for the year then ended: Foreign Currency Sensitivity Analysis (In millions) -10% Actual +10% (1) (2) Net revenues $ 11,707 $ 10,537 $ 9,579 Expenses (*) (10,516) (9,503) (8,675) Income from operations 1,191 1,034 904 Other income/(expenses) and income tax related to P&L items (381) (354) (331) Foreign Currency impact related to the remeasurement of our Net Asset position (204) (198) (193) Net Income 606 482 380 Total Shareholders’ Equity $ 2,111 $ 1,827 $ 1,595 (1) Appreciation of the subsidiaries local currency against U.S.
Table of Contents Foreign currency sensitivity analysis The table below shows the impact on our net revenues, cost of net revenues, operating expenses, other income (expenses), income tax expense and equity in earnings of unconsolidated entity, net income and equity for a positive and a negative 10% fluctuation on all the foreign currencies to which we are exposed to as of December 31, 2023: (10)% (1) Actual ' +10% (2) (In millions) Net revenues $ 16,081 $ 14,473 $ 13,157 Expenses (3) (13,992) (12,650) (11,551) Income from operations 2,089 1,823 1,606 Other income (expenses), income tax expense and equity in earning of unconsolidated entity related to P&L items (243) (221) (213) Foreign Currency impact related to the remeasurement of our Net Asset position (640) (615) (595) Net Income $ 1,206 $ 987 $ 798 Total Shareholders’ Equity $ 3,435 $ 3,071 $ 2,763 (1) Increase of the subsidiaries local currency against U.S.
The “Applicable Year Stock Price” shall equal the average closing price of our common stock on the NASDAQ Global Select Market during the final 60 trading days of the year preceding the applicable payment date. 68 Table of Contents As of December 31, 2022, the total contractual obligation fair value of our outstanding LTRP Variable Award Payment obligation subject to equity price risk amounted to $157 million.
As of December 31, 2023, the total contractual obligation fair value of our outstanding LTRP Variable Award Payment obligation subject to equity price risk amounted to $418 million.
Removed
Latin American countries in which we operate have been negatively affected by the outbreak of COVID-19, which has generated macroeconomic instability and led to the depreciation of certain Latin American currencies. We are also exposed to market risks arising from our long-term retention plans (“LTRPs”).
Added
The derivatives’ gain or loss for fair value hedges is reported in our consolidated statements of income in the same line items as the change in the value of the hedged item due to the hedged risks.
Removed
Risk Factors - Risk related to doing business in Latin America - Local currencies used in the conduct of our business are subject to depreciation, volatility and exchange controls”), and higher foreign exchange losses from our Brazilian subsidiaries. (See “Item 7.
Added
As of December 31, 2023, we hold cash and cash equivalents in local currencies in our subsidiaries, and have receivables denominated in local currencies in all of our operations. Our subsidiaries generate revenues and incur most of their expenses in the respective local currencies of the countries in which they operate.
Removed
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Principal trends in results of operations—Other income (expenses), net” for more information). See Note 2 to our audited consolidated financial statements for further detail on Argentina’s functional currency change.
Added
See Note 2 – Summary of significant accounting policies - Foreign currency translation - Argentine currency status and macroeconomic outlook of our audited consolidated financial statements for further detail on the currency status and the exchange regulations of our Argentine segment.
Removed
Argentina’s annual depreciation of its local currency against the U.S. dollar for the years ended December 31, 2022, 2021 and 2020 was 72.5%, 22.1% and 40.5%, respectively.
Added
See Note 3 – Fintech Regulations and Note 5 – Cash, cash equivalents, restricted cash and cash equivalents and investments of our audited consolidated financial statements for further detail on our restricted investments.
Removed
In the second half of 2019, the Argentine government instituted exchange controls restricting the ability of companies and individuals to exchange Argentine Pesos for foreign currencies and their ability to remit foreign currency out of Argentina.
Added
As of December 31, 2023, our loans payable and other financial liabilities which accrue interest based on variable rates amounted to $2,810 million, while our loans payable and other financial liabilities, which accrue interest based on fixed rates, amounted to $1,685 million.
Removed
An entity’s authorization request to the CBA to access the official exchange market to make foreign currency payments may be denied depending on the circumstances.
Added
See Note 17 – Loans payable and other financial liabilities and Note 21 – Securitization transactions of our audited consolidated financial statements for further detail.
Removed
As a result of these exchange controls, markets in Argentina developed trading mechanisms in which an entity or individual buys U.S. dollar denominated securities in Argentina (i.e. shares, sovereign debt) using Argentine peso, and subsequently sells the securities for U.S. dollars, in Argentina, to access U.S. dollars locally, or outside Argentina, by transferring the securities abroad, prior to being sold (the latter commonly known as Blue Chip Swap Rate).
Added
Considering a hypothetical increase of 100 basis points in the interest rates, the reported Loans payable and other financial liabilities as of December 31, 2023 would have increased by approximately $16 million with the related impact in Interest expense and other financial losses.
Removed
The Blue Chip Swap Rate has diverged significantly from Argentina’s official exchange rate (commonly known as exchange spread). In recent years, the Blue Chip Swap Rate has been higher than Argentina’s official exchange rate.
Added
Table of Contents Change in equity price in percentage As of December 31, 2023 MercadoLibre, Inc Equity Price 2019, 2020, 2021, 2022 and 2023 LTRP Variable contractual obligation (In millions, except equity price) 40% 2,210.74 585 30% 2,052.83 544 20% 1,894.92 502 10% 1,737.01 460 Static (1) 1,579.10 418 -10% 1,421.19 376 -20% 1,263.28 335 -30% 1,105.37 293 -40% 947.46 251 (1) Present value of average closing stock price for the last 60 trading days of the year preceding the applicable payment date.
Removed
As of December 31, 2022, 2021 and 2020, the spread of the Blue Chip Swap Rate was 94.2%, 96.8% and 66.7%, respectively (see Notes 2 “Summary of significant accounting policies – Argentine currency status” and 25 “Share repurchase program” of our audited consolidated financial statements) .
Removed
See Note 24 of our audited consolidated financial statements for further detail on derivatives instruments. 67 Table of Contents Equity Price Risk Our board of directors, upon the recommendation of the compensation committee, approved the 2018 Long Term Retention Plan (the “2018 LTRP”).
Removed
In order to receive an award under the 2018 LTRP, each eligible employee must satisfy the performance conditions established by the board of directors for such employee.
Removed
If these conditions are satisfied, the eligible employee will, subject to his or her continued employment as of each applicable payment date, receive the full amount of his or her 2018 LTRP award, payable as follows: • the eligible employee will receive a fixed payment, equal to 8.333% of his or her 2018 LTRP bonus once a year for a period of six years starting no later than April 30, 2019 respectively (the “2018 Annual Fixed Payment”); and • on each date we pay the respective Annual Fixed Payment to an eligible employee, he or she will also receive a payment (the “2018 Variable Payment”) equal to the product of (i) 8.333% of the applicable 2018 LTRP award and (ii) the quotient of (a) divided by (b), where (a), the numerator, equals the Applicable Year Stock Price (as defined below) and (b) the denominator, equals the 2017 Stock Price, defined as $270.84, which was the average closing price of our common stock on the NASDAQ Global Select Market during the final 60 trading days of 2017.

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